The ongoing GST rationalisation could reshape India's EV sector. A proposal to increase GST on premium EVs aims to differentiate the mass-market from luxury offerings, tackling revenue loss and promoting fairness in taxation policy.
As per news reports, the Group of Ministers (GoM) on rate rationalisation has proposed increasing GST on premium electric 4-wheelers priced between ₹20,00,000 and ₹40,00,000 from the existing 5% to 18%.
This recommendation was submitted to the 56th GST Council for consideration. The move targets luxurious EVs that currently enjoy the same concessional rate as entry-level models, causing a potential revenue imbalance and policy ineffectiveness.
The panel holds that the GST framework should differentiate between affordable, mass-market EVs and premium models so that government incentives are more effectively directed. The GoM has recommended that electric buses remain under the concessional tax slab, considering their importance in public transport. The Centre, however, has suggested retaining the existing 5% concessional GST rate for all categories of EVs, including both electric cars and buses.
The GoM believes a uniform GST rate of 5% disproportionately benefits high-income consumers purchasing luxury EVs. With the goal of promoting mass adoption while safeguarding revenues, the group suggested a separate GST slab for high-end EVs. Electric buses, however, are expected to continue enjoying the existing concessional rate due to their public transport relevance and wider environmental benefits.
Officials noted that the present structure risks substantial revenue loss and creates inequity by offering tax breaks even on premium electric vehicles. The recommendation draws a clear line between vehicle categories, supporting sustainable policymaking that promotes value-for-money and environmentally-friendly mobility solutions for the broader population.
Read More: Centre Proposes 18% GST on Premium Air Travel Ahead of Council Meet!
The proposals are currently with the GST Council, which will discuss them during its meeting scheduled for September 3-4, 2025, in New Delhi. The council's decision will determine the final GST structure on EVs going forward. If passed, this amendment could lead to increased pricing of luxury EVs, potentially reducing their demand in India's affluent segments.
If implemented, the revised GST rates on premium EVs will mark a decisive shift in India's electric mobility strategy. By aligning tax benefits with affordability, the government aims to balance environmental goals with fiscal prudence and equitable taxation.
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Published on: Aug 30, 2025, 1:40 PM IST
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