The budget presented by the new Finance Minister Ms Nirmala Sitharaman brought new incentives for the country’s electric vehicle sector. Best incentive was consumers of electric vehicles can get an additional income tax deduction of up to Rs1.5 lakh for interest payments on any e-vehicle loans. With the new incentive, the total interest that can be deducted by a person buying electric vehicles goes to Rs 2.5 lakh.
In another front, the Finance Minister offered a lower GST rate for electric vehicles. The GST rate will be reduced from 12% to 5%.
Dealers grieve that only few existing models qualify for several of the budget and even the earlier announced FAME -2 supports. Despite this, government hope that the collective incentive mechanism may compel the manufactures to develop models that can suit the new requirements.
As per the FAME policy, only passenger vehicles including cars will get the FAME -2 subsidy incentive if the price of the car is less than Rs 15 lakh. Similarly, there is other technical specifications, to be eligible to get the subsidies for manufacturing e-vehicles under FAME -2.
FAME-2 offers subsidies to a total number of 35,000 electric and plug-in electric vehicles and 20,000 hybrid vehicles provided their ex-factory price is not more than Rs 15 lakh and they are used as taxis for public mobility.
Though the budget has diversified the support mechanisms for the sector, manufactures feel that in the highly sensitive Indian market, EVs’ competitiveness against conventional vehicles is still lower. For them, the government should design a differentiated and segment specific measures.
The budget also announced producer support incentives. Here, import duty exemptions were declared for imported lithium-ion batteries.
Similarly, the budget introduced investment linked incentives for manufacturing e-vehicles under Section 35AD of the Income Tax Act. This means that the manufacturers can get income tax benefits based on the size of their investment in the electric vehicle sector.
The industry experts feel that the government should give a differentiated support system to two and three-wheelers, small commercial vehicles, micro-mobility vehicles and buses for e-mobility. This is because the end use purpose and technical challenges for these types of e-vehicles are different from one another.
