In a bid to make electric vehicles (EVs) more affordable, the union government on Saturday reduced the tax duty on EVs and electric vehicle chargers from 12% to 5% and 18% to 5% respectively. Following the union budget incentives, this is the second boost to electric vehicle in the last four weeks.

In a statement, the finance ministry said: “GST rate on EVs will be reduced to 5% from 12%. As of now, petrol and diesel-based automobiles attract GST at the rate of 28%, besides a cess.”

However, due to the high cost of EVs, a lower duty, at best, reduce the price gap between two kinds of vehicles. But the prices of electric vehicles will still be higher. Earlier, in the recent Union Budget, the government had made provision to provide for an income tax benefit for an EV buyer.

The government will provide an additional income-tax deduction of INR 1.5 lakh on the interest paid on loans taken for purchase of EVs. This amounts to a benefit of around 2.5 lakh over the loan period to the taxpayers who take loans to purchase a electric vehicle.

To make infrastructure for EV affordable, the Council also decided to lower the GST rate on the charger or charging stations for EV to 5% from 18%. Also, to make EV popular for public transportation, hiring of electric buses (of carrying capacity of more than 12 passengers) by local authorities will be exempted from GST.

Reduction in GST on electric vehicles and related accessories will help four-wheeler companies like Hyundai, Mahindra, Tata and BMW, already delivering EVs and Maruti-Suzuki (launching next year). Besides, two-wheeler companies in the EV sector like Hero Electric, Revolt Intellicorp, Ather Energy, Kinetic Green, Tork Motors, 22Kymco and Log 9 Materials, will also benefit from the government’s move.

Opportunities for Green Logistics

Recently, Flipkart’s logistics arm Ekart has announced that it will replace 40% of its delivery fleet with electric vehicles by March 2020.

In logistics, electric vehicles for last mile connectivity will contribute to a wide range of sustainable goals including – better air quality, reduced noise pollution, enhanced energy security as well as low carbon power generation mix, reduced greenhouse gas emissions. Innovative transport solutions for first-and-last-mile deliveries are areas where EVs will prove to be a boon for the future generations. For instance, a fleet of 250 EVs will save around USD 1 Million worth of fuel and can reduce the carbon emission by 4,000 tonnes annually.