Budget 2023: EV Industry Expects Lower GST Rates; Policies to Reduce Carbon Credits and More

It’s about time that India, one of the largest producers and markets for personal transport vehicles, moved towards clean energy options to reduce carbon emissions and minimise environmental impact. The electric vehicle (EV) industry has high expectations from the government in Budget 2023 to encourage both the growth of the industry as well as to make EVs more accessible to consumers. 

A reduction in the GST rate to 5%

One of the top priorities for the industry in this Budget is to get a reduction in the GST rate on lithium-ion battery cells and packs to 5% from the present rate of 18%. A reduction in the rate would help reduce the cost of these batteries and, thereby, the cost of the vehicle, given that most electric vehicles use lithium-ion batteries today. It would also bring the GST rate on batteries used in EVs in line with the GST rate on EVs, which stands at 5%. 

An extension of the FAME II subsidy program

The FAME II subsidy program was launched to create demand for electric vehicles in India. The scheme encourages consumers to adopt electric or hybrid vehicles, encourages manufacturers, and assists in the setting up of EV charging infrastructure. 

While initially launched in 2019 for three years, the government has extended the subsidy until March 2024. Now, the EV industry has been urging the government to consider an extension to support the industry and make EVs more affordable for consumers. An extension of the program will be a vital step in achieving the government’s goal of having 30% of vehicles on Indian roads comprising electric vehicles by 2030.

Policies to reduce carbon emissions

The next major demand of the industry is for the government to implement policies to encourage companies to reduce their carbon emissions. With measures such as a cap-and-trade system in place, companies are encouraged to reduce their carbon emissions and sell their excess carbon credits to companies that need to meet the required limits. Policies such as this will increase demand and support the growth of the electric vehicle industry.

A PLI scheme for battery pack manufacturing

The Indian government has implemented a production-linked incentive (PLI) scheme for cell manufacturing in India. However, the EV industry feels that a PLI scheme for battery pack manufacturing would boost manufacturing and meet projected demand.

The EV industry in India is picking up pace in India, given the whole need for renewable energy and green vehicles in the personal mobility department. Millennials and Gen Z are more conscious about sustainability, and the need and demand for EVs are more than it’s ever been in India and is only growing by the day. Hopefully, with some of these expectations met in Budget 2023, the industry can continue to make progress and grow while increasing accessibility to Indian consumers.

For any clarifications/feedback on the topic, please contact the writer at athena.rebello@clear.in