Budget 2021

Union Budget 2019-20: Tax break to rev up electric vehicle sales

An electric car is displayed at Future Mobility Show 2019 in Bengaluru on February 26, 2019.   | Photo Credit: The Hindu

Amid heated debates over the country’s preparedness for transitioning to electric vehicles, Budget 2019 proposes to offer additional income tax exemption of ₹1.5 lakh to vehicle buyers, while also pitching to make India a global manufacturing hub for such vehicles.

“To make electric vehicles affordable to consumers, our government will provide additional income tax deduction of ₹1.5 lakh on the interest paid on loans taken to purchase electric vehicles,” Finance Minister Nirmala Sitharaman said in the budget speech.

This, she said, will amount to a benefit of around ₹2.5 lakh over the loan period to the taxpayers who take loans to purchase electric vehicles. The loan is required to be taken on or before March 31, 2023.

Electric vehicles are expected to be nearly twice the cost of the comparable ICE vehicle.

Lower rates

To further help bring down the prices, the government has moved the GST Council to lower the rate on electric vehicles from 12% to 5%, Ms. Sitharaman said.

“Considering our large consumer base, we aim to leapfrog and envision India as a global hub of manufacturing of electric vehicles. Inclusion of solar storage batteries and charging infrastructure in the above scheme will boost our efforts,” she said.

The statement comes at a time when the industry and NITI Aayog are at loggerheads over the latter’s proposal to sell only electric three wheelers post-March 2023, and electric two wheelers in the 150cc and below segment, post-March 2025 onwards.

Customs duty exempt

She announced that customs duty is being exempted on certain parts of electric vehicles, including e-drive assembly and on board charger, to further incentivise e-mobility.

In February this year, the Cabinet had approved the second phase of the Faster Adoption and Manufacturing of Electric Vehicles or FAME scheme, with an outlay of ₹10,000 crore for three years. This came into effect from April 1, 2019.

“The main objective of the scheme is to encourage faster adoption of electric vehicles by way of offering upfront incentive on purchase of electric vehicles and also by establishing the necessary charging infrastructure. Only advanced battery and registered e-vehicles will be incentivised under the scheme with greater emphasis on providing affordable & environment friendly public transportation options for the common man,” Ms. Sitharaman said.

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Printable version | Sep 18, 2021 7:19:20 AM | https://www.thehindu.com/business/budget/tax-break-to-rev-up-electric-vehicle-sales/article28298483.ece

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