GST on electric vehicles may be reduced to 5%

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India may cut the goods and services tax (GST) on electric vehicles to 5% from 12% to provide a stimulus to the sector that’s a high priority for the Narendra Modi government. The GST Council is set to take up the proposal at its June 21 meeting, said a senior government official aware of the development. “There is a proposal to cut tax rates on EVs among other issues,” the official told ET. Lower duties are expected to encourage global manufacturers to invest in India’s planned shift to electric vehicles in order to try and bring down pollution levels. This comes as Punjab has written to the Centre seeking a review of tax rates. Tackling Slowdown The state has sought new rates for automobiles, textiles, micro, small and medium enterprises (MSMEs) and real estate to provide a boost to the economy, which has slowed to the lowest in five years in FY19. Punjab finance minister Manpreet Badal has suggested to union finance minister and GST Council chairman Nirmala Sitharaman that tax rates for these sectors need to be lowered to address the slowdown.

The automobile sector has sought urgent measures to boost demand, after recording the steepest decline in sales in 18 years. Passenger vehicle sales have been sliding and fell by 21% in May, prompting closure of dealerships and plant shutdowns. The RBI consumer confidence index, based on a survey in 13 cities, fell to 97.3 in May, indicating pessimism about jobs and prices. Electric Vehicles Policymakers favour incentivising electric vehicles in line with the government’s long-term strategy. The Niti Aayog has prepared a roadmap that envisages all vehicles sold after 2030 being electric. The roadmap lays down that all two-and three-wheelers should go electric from 2023 and all commercial vehicles from 2026.

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