Govt to lower GST rates for retrofitment of petrol vehicles to EVs? ET NOW EXCLUSIVE

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The government is considering a reduction in GST on retrofitted EVs (Pic: Canva Pro/ET NOW DIGITAL)

The government is considering lowering the goods and services tax (GST) rate on the retrofitment of petrol vehicles to electric vehicles (EV), ET NOW has learnt. Retrofitment of a petrol vehicle to an EV, which presently attracts a GST of 18 per cent, may soon attract only a five per cent GST. The tax on buying a new EV is also only five per cent.
The proposal for the lowered GST is likely to be sent to the Finance Ministry very soon. From there, it is likely to be forwarded to the GST Council. The Minister for Road Transport & Highways, Nitin Gadkari has also given in-principle approval to this concept.

Current cost of retrofitment

Retrofitment includes replacing a vehicle’s petrol engine with an electric power train. Converting a two-wheeler costs somewhere around Rs 20,000 to Rs 50,000. For a three-wheeler, it costs somewhere around Rs 50,000 to Rs 70,000, whereas for four-wheelers of 1,000 cc and above, the price is around Rs 2-2.5 lakh.

Why is the government considering lower GST on retrofitted EVs?

The government understands that if the GST is reduced on the retrofitment, then there are two big advantages.

Firstly, there are a huge number of old petrol vehicles that can be easily converted to EVs. This move will give a push to electric mobility in the country. Secondly, the EVs will become much more affordable for the common people of the country. Right now, buying a new EV is rather expensive. In fact, it is one of the reasons that the wider acceptance of such vehicles is still a challenge.

Relief for industry players

The government understands that retrofitment is good for pushing e-mobility in the country. If everything goes well, this will be very a big relief for the industry players in the retrofitment segment.

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