Small cars, bikes cheaper, but EVs to see shrinking tax edge

Tax differential between electric and conventional cars with smaller engines to reduce

- Nehal Chaliawala, Manas Pimpalkhare & Ayaan Kartik

India's new goods and services tax (GST) reset, while a relief for small cars and two-wheelers, could slow down the country's electric vehicle (EV) revolution.

With GST tax rates for popular petrol and diesel vehicles dropping, the price gap between conventional and electric models is set to widen, raising fresh doubts about how quickly EVs will be adopted. EVs are already more expensive to make than internal combustion engine (ICE) vehicles. A concessional GST rate of 5% had earlier helped bridge this gap, narrowing sticker prices and encouraging consumers to recover the higher upfront cost through lower operating costs.

But with two-wheelers below 350cc and cars under 4 metres now taxed at 18% (instead of 28%), the sharp fall in ICE prices will make many customers rethink their EV purchase plans.