Budget 2019: GST on EVs reduced to 5%, tax incentives on loan

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Along with sops for consumers, the Union Budget 2019-20 has outlined various proposals to develop India as a global hub for manufacturing of electric vehicles.

Presenting the budget, finance minister Mrs Nirmala Sitharaman said that only advanced battery and registered e-vehicles will be incentivized under Phase-II of the FAME [Faster Adoption and Manufacturing of Electric Vehicles in India] scheme. The main objective of the scheme is to encourage faster adoption of electric vehicles through upfront incentive on purchase of such vehicles and also by establishing the necessary charging infrastructure for the same.

Phase II of FAME—rolled out from April 1—has an outlay of Rs10,000 crore for a period of 3 years.

The minister added that the inclusion of solar storage batteries and charging infrastructure in the FAME scheme will give a boost to manufacturing, which is needed for India to leapfrog and become a global hub for  manufacturing of these vehicles.

Tax rebates

The government has already moved Good and Services Tax (GST) council to lower the GST rate on electric vehicles from 12% to 5%.  Also to make electric vehicles affordable to consumers, the government will provide additional income tax deduction of Rs 1.5 lakh on the interest paid on loans taken to purchase electric vehicles.  This amounts to a benefit of around Rs 2.5 lakh over the loan period to the taxpayers who take loans to purchase electric vehicle.

To further incentivise e-mobility, customs duty is being exempted on certain parts of electric vehicles.

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