GST Council may reduce tax on electric vehicles

Charging for the future: The government seems committed to its vision of popularising EVselectric vehicles , says Archit Gupta.

Charging for the future: The government seems committed to its vision of popularising EVselectric vehicles , says Archit Gupta.   | Photo Credit: Reuters

Members likely to discuss easing of solar sector levies and rates for lotteries at Saturday’s meet

The Goods and Services Tax (GST) Council, at its 36th meeting on Thursday, is likely to reduce the tax rate on electric vehicles, ease tax issues for the solar sector and deliberate on the tax rate on lotteries.

The meeting, which will take place over video conference, is unlikely to take up any other issue since the members prefer to discuss them in person, officials in the Council said.

“The government seems committed to its vision of popularising electric vehicles in a big way and is likely to reduce the GST rate on EVs,” said Archit Gupta, founder and CEO ClearTax. “This seems like a comprehensive approach with tweaking of both direct and indirect taxes.”

On the direct tax side, the government had, in the Budget, announced an additional income tax deduction of up to ₹1.5 lakh on the interest paid on loans taken to purchase electric vehicles.

In its last meeting, the Council had asked the Fitment Committee to look into the matter of reducing the GST rate on electric vehicles from 12% to 5%.

EV ecosystem

“The rest of the ecosystem required for functioning of EVs such as charging stations and availability of electricity should also be considered,” Mr. Gupta added. “Reduction of GST on batteries may also be on the cards.”

The Council is also expected to discuss the tax incidence for the solar sector.

At the moment, according to a notification issued earlier this year, 70% of the cost of a solar plant is considered as goods and is taxed at 5%.

The remaining 30% is considered as services and is taxed at 18%. Solar manufacturers have approached the Council saying that the break up of goods and services is more along the lines of a 90-10 split rather than 70-30.

As such, they have requested that the Council amend the notification to incorporate this. This is likely to come up for discussion on Thursday.

“It is necessary to appropriate the right proportion of goods and services to solar projects as the present allocation makes such projects incur more tax costs, which again cannot be passed on as input tax credits,” said M.S. Mani, partner at Deloitte India.

Merger of lottery rates

The third issue the GST Council is expected to discuss is the tax rate on lotteries. Currently, State-run lotteries are taxed at 18% while State-authorised lotteries are taxed at 28%.

Lottery owners have requested the Council to merge the two rates, and also consider bringing that rate down to 12%.

The Council had, in its last meeting, said it would approach the Attorney General of India for his view on the matter. Those inputs have reportedly been received by the Council and will be discussed on Thursday.

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Printable version | Apr 8, 2020 8:51:18 AM |

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