EV Sector Eagerly Awaits Tax Cuts and Subsidy Extensions in the Upcoming Interim budget!

The primary demand from electric vehicle (EV) stakeholders is to establish fair taxation, particularly addressing the increased goods and service tax (GST) applied to EV batteries, a substantial component of the relatively elevated expenses associated with electric vehicles.

As Finance Minister Nirmala Sitharaman prepares to unveil the Interim Budget 2024 on February 1, the electric vehicle (EV) industry is advocating for various tax and subsidy adjustments, along with supportive policies, to foster the growth the sector is currently experiencing.

The primary demand from electric vehicle (EV) stakeholders is to establish fair taxation, particularly addressing the increased goods and service tax (GST) applied to EV batteries, a substantial component of the relatively elevated expenses associated with electric vehicles.

What Akhiro Ueda said?

“Reducing the GST on batteries from 18% to 5% will enhance the affordability of electric vehicles for consumers, speeding up the adoption rate. This adjustment will also enable manufacturers to channel more resources into research and development, fostering further innovation in their products,” stated Akhiro Ueda, CEO of Tarra Motors India, an EV ecosystem developer.

Although the Ministry of Finance doesn’t have authority over GST rate revisions, industry leaders are optimistic that the forthcoming budget speech might include positive language.

What Hari Kiran said?

The industry is also seeking a decreased tariff on importing spare parts for electric vehicles to enhance cost competitiveness within the sector. “The decrease in customs duty on EV components in the prior budget stimulated domestic manufacturing, and analogous modifications are anticipated in the 2024 budget,” stated Hari Kiran, Co-founder and Chief Operating Officer at the electric two-wheeler rental platform eBikeGo.

The sector also expects a continuation of the Faster Adoption & Manufacturing Electric Vehicles (FAME II) subsidy, set to conclude on March 31. This subsidy encourages the local production of EVs and has offered assistance to more than 12.16 lakh electric vehicles, incurring an expense of Rs 5,422 crore, up to December 2023. A prospective FAME III subsidy is currently in progress, and the sector is urging for a prolongation of the existing scheme until the new iteration gets approval.

What Rohan Sharan said?

“As outlined in FICCI’s proposal, FAME III is anticipated to require an investment surpassing Rs 30,000 crore over the next five years. This fresh initiative has the potential to reinforce the electric vehicle sector and sustain the impetus for the adoption of EVs in India,” remarked Rohan Shravan, CEO and founder of Tresa Motors, a manufacturer specializing in medium and heavy electric trucks.

“We propose involving electric vehicle component manufacturers in FAME III to ensure the elimination of loopholes allowing original equipment manufacturers (OEMs) to directly source from China and merely assemble here,” stated Shravan.

“In addition to FAME, the production-linked incentives (PLI) schemes have also catalyzed domestic manufacturing endeavors in recent years. It would be advantageous if the forthcoming budget included measures to broaden the reach of PLI schemes, potentially boosting overall manufacturing demand and ensuring the efficient utilization of incentives,” remarked Ueda from Terra Motors.

An increased capital allocation towards sustainable energy and cleantech is anticipated in the interim budget, aligning with India’s goal to slash carbon emissions by 50% by 2030.

What Sameer Aggarwal said ?

“Essentially, with the accelerating shift towards electric vehicles, the imperative lies in incorporating renewable energy into the country’s grid. A targeted allocation in the financial plan for sustainable energy will not just provide electricity for households but also support the growing electric vehicle sector,” expressed Sameer Aggarwal, the Chief Executive Officer and originator of Revfin Service, a firm specializing in electric vehicle financing.

Foreseen capital will be directed toward offerings like electric vehicle charging and battery interchange, as concerns regarding driving range persist as a significant obstacle in the broader adoption of electric vehicles.

“Beyond financial allocations, our expectation is that the budget reveals a comprehensive policy framework for electric vehicles, tackling licensing, safety standards, and insurance norms specifically tailored for electric vehicles,” Kiran from eBikeGo added.

In the anticipated policy adjustments, SunMobility CEO Chetan Maini highlighted the forthcoming introduction of an all-encompassing Battery Swapping Policy, emphasizing that the service “is crucial to expedite the embrace of electric mobility and meet the 2030 objectives for EV integration.” He suggested the inclusion of incentives for the service and a fair GST framework applied to them.