A tax cut with unintended impact for India ’s EV momentum

The Indian electric vehicle (EV) sector, particularly the small car and hatchback segment, may soon face a speed bump. The proposed goods and services tax (GST) recast could boost the small passenger car market. Small cars are likely to be placed in the 18% tax slab, substantially reducing the tax burden on them, as per a recent ET report based on information from sources. Small cars of 4 metres and less in length and engine capacity up to 1,200 cc (petrol, CNG and LPG) now attract 28% GST and 1% cess. Large cars and SUVs are likely to face the special rate of 40%, sources told ET. Currently, these vehicles attract 43-50% tax, which includes GST and cess.