Electric vehicles (EVs) in India have enjoyed a preferential Goods and Services Tax (GST) rate of 5%—a key incentive driving adoption. However, proposed GST reforms might change the tax landscape, raising the rate to 18% for select high-end electric cars priced between ₹20 lakh and ₹40 lakh.
Regulatory Context & Proposal Details
The Group of Ministers (GoM) overseeing GST simplification has recommended introducing a two-slab GST structure—5% and 18%—to replace the current multi-slab system. Amid this overhaul, the GoM proposed that premium four-wheeled EVs, specifically those costing ₹20 lakh to ₹40 lakh, be moved from the concessional 5% slab to the regular 18% GST slab.
Why the Shift Matters
Officials argue the uniform 5% GST rate disproportionately benefits luxury EV buyers and erodes revenue potential. A differentiated approach, they suggest, is necessary to ensure fairness and fiscal sustainability. This adjustment aims to distinguish between affordable mass-market EVs and high-end electric cars. Business Today
What’s Next
The decision now rests with the GST Council, which is scheduled to meet on September 3–4, 2025 in New Delhi to deliberate on these proposals.
What This Could Mean for India’s EV Market
- Price Impact: Luxury EVs may see a significant increase in ex-showroom prices if the GST hike is approved.
- Market Dynamics: Higher tax rates on premium models could shift consumer attention toward more affordable EV offerings.
- Adoption Strategy: The move underscores a broader push toward equity in policy benefits between mass-market and premium consumers.
