EVs to Retain 5% GST as New Tax Structure Rolls Out on September 22, 2025

The GST Council has confirmed that electric vehicles (EVs) in India will continue to attract a concessional 5% GST rate under the new indirect tax structure coming into force from September 22, 2025. This decision preserves EVs’ tax edge over internal combustion engine (ICE) vehicles, many of which will now move to a higher 18% GST slab.

EVs Retain 5% GST, But Ecosystem Rates Remain Split

Electric vehicles remain in the 5% GST bracket, with no compensation cess, ensuring continued price competitiveness in the evolving automotive market. This rate was reaffirmed during the GST Council's September meeting, even as broader slab reforms narrowed most rates to either 5% or 18%.

However, not all parts of the EV ecosystem enjoy the same benefit. EV chargers and charging stations as physical goods are taxed at 5%, but services such as battery swapping and charging typically fall under the 18% GST category. Standalone lithium-ion batteries also attract 18% GST when sold separately, creating a fragmented rate structure.

Policy Gaps and Industry Concerns

While the concessional GST on EVs encourages retail adoption, however, concerns about the inverted tax structure affecting charging and swapping operators overhang. Charging services taxed at 18% generate accumulated input tax credits, impacting cash flows and increasing working capital requirements for service providers.

Read More: GST Rate Revised: Know Which Items Get Cheaper and Costlier, Electronics, Auto and Life Insurance!

Market Impact and Forward Outlook

The decision to retain 5% GST on EVs ensures their relative affordability versus ICE counterparts, especially in the entry and mid-range segments. With ICE vehicle slabs largely shifting to 18%, the pricing differential could support continued momentum in EV sales. However, pending harmonisation of GST rates across EV-related goods and services remains a key area for future policy reform.

Conclusion

As of September 22, 2025, EVs will continue to benefit from the 5% GST rate under India’s revised tax system. However, with charging and swapping services and standalone batteries still taxed at 18%, the EV ecosystem remains subject to rate asymmetry. Further rationalisation may be needed to unlock the full potential of EV infrastructure growth.

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