The decision to bring down the GST rate on Electric Vehicles and chargers to 5% will be a big boost to the efforts to increase the adoption of electric mobility in the country. The present GST rate on EVs and chargers is 12% and 18% respectively. The 36th meeting of the GST Council also exempted the hiring of electric buses by local authorities from the GST. The latest set of measures, coupled with the tax benefits announced in the recent budget for the loans taken for buying electric vehicles, will make EVs more affordable to consumers. The NDA government has committed to gradually doing away with fossil fuels and moving towards renewable energy and unveiled incentives towards that. The EV manufacturing industry, which is in a nascent stage in the country, has a reason to cheer now as the tax reduction would boost the demand, help popularise electric vehicles and increase penetration. The start-ups in the mobility space will also be benefited since theirs products can now become competitive. The reduction in the prices of electric cars could be in the range of Rs 50,000 to Rs 1.5 lakh, depending on the model and the make, creating a mass market for the non-polluting personal transport machines. There is an urgent need to switch from vehicles fuelled by petrol and diesels to EVs in order to reduce greenhouse gas emissions under the global agreement on climate change.
Currently, there are nearly 4 lakh battery-operated EVs on Indian roads. The tax benefit will help create an ecosystem that will encourage faster mass adoption of EVs that will go a long way in reducing spending on oil imports, which amounted to $112 billion in 2018-19. While the initiatives to give push to adoption of electric mobility are laudable, there is still a gap in the price premium for EVs, which should be gradually reduced through technology advancements and localisation in manufacturing. According to NITI Aayog’s estimation, if India reaches an EV sales penetration of 30% of private cars, 70% of commercial vehicles, 40% of buses and 80% of two- and three-wheelers by 2030, the country can save 846 million tonnes of net carbon dioxide emissions and can also save 474 million tonnes of oil equivalent. India has committed to cut its greenhouse gas emissions below its 2005 levels by 2030, which would mean a reduction of around 33% to 35%. The country has also set a target to add 175 GW of capacity through renewable energy by 2020, and achieve 40% of the electricity generation from non-fossil sources by the same year. Given that 80% of the transport oil requirement is being met by imports, there is a strong case for switching over to EVs.