In a big relief for luxury carmakers that sell electric vehicles in India, the GST Council has decided to continue with the earlier 5% Goods and Services Tax (GST) on EVs.

This comes after several media reports suggested that there could be a higher GST on high-end electric vehicles.

Cheering the move, Mercedes-Benz India managing director and CEO Santosh Iyer thanked the government for keeping the GST rate for battery electric vehicles (BEVs) unchanged, ensuring a faster transition to a decarbonised future.

In a big boost for luxury cars, the new GST structure also slashes the tax rate on bigger ICE and hybrid cars from 43-50% to a uniform 40%.

“The government listened to the automotive industry’s long-standing wish list of rationalising GST rates. This GST revision is a step in the right direction, is progressive and will induce the much-needed impetus by boosting consumption and bringing momentum to the automotive industry which essentially remains the pulse of the Indian economy,” said Iyer.

“The GST Council decision on rate rationalization is a welcome development that will positively influence consumer sentiments and boost consumption. The GST rate reduction across various sectors is in line with the government’s vision of Viksit Bharat and economic growth. We congratulate the government and GST Council on implementing bold reforms.

BMW Group India president and CEO Hardeep Singh Brar said the 40% GST on premium cars without any additional cess is good news for the premium car industry and will drive new sales. "The retention of 5% GST on all passenger BEV cars is highly welcome. "Long-term and stable taxation on electric cars will allow auto companies to continue with strategic expansion of product lines and move ahead with long-term plans to ‘Make in India’," he added.

Brar, however, cautioned that the increase in GST to 40% for motorcycles above 350cc will have a negative impact on the mid-segment and high-end segment models, which have been seeing good growth for the past few years.

"Overall, the customers will benefit largely from these revised GST rates. Once these are implemented, we expect that the limbo in buying decisions will break and new sales will be back on track before festive season ends,” he concluded.

Balbir Singh Dhillon, head of Audi India, said that he views the GST simplification as a step in the right direction, one that supports industry growth and helps carmakers expand the market.

“The GST Council’s move to retain a low rate for EVs is a welcome step; this brings much-needed clarity and makes our portfolio more accessible to our discerning buyers. Such reforms help stabilise the business environment and help devise strategies that benefit all stakeholders in the best possible manner,” said Dhillon. “It also enhances transparency and aligns with India’s economic vision,” he added.