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GST & Subsidies on Electric Vehicles in India

GST & Subsidies on Electric Vehicles in India
GST & Subsidies on Electric Vehicles in India

Electric Vehicles are still the backbenchers and dark horses of the automobile industry. Everyone knows the benefit of using an electric vehicle but are still apprehensive of making it their own. The Customer base of India still trusts the traditional auto industry, which is causing toxic pollution day in and day out.

The Indian government envisions India as a global EV and battery hub. The Govt understands the sentiments and concerns of the general consumer towards the electric vehicle and hence has come up with outstanding policies in the union budget 2019.

  • GST on Electric Vehicles is reduced from 12% to 5%.
  • GST on Electric Vehicle Batteries is reduced from 18% to 5%.
  • Income Tax savings up to 1.5 lacs INR on the Interest rate paid on Electric Vehicle loans.
  • Apart from the GST and Income tax benefits, the Government of India along with the manufacturer is in the process of setting up lithium-ion battery production

The newly inserted section on Income tax is called section 80EEB of Income Tax Act, 1961 is effective from AY20-21(FY 2019-20). This section talks about deduction on interest payable on the loan, taken for the purpose exclusively for Electric Vehicles. This is one of the most eco-friendly income tax sections and can also save you a lot of tax. 80EEB section is only applicable for individual buyers and also doesn’t encourage hybrid vehicles. Adding to the benefits, over the entire course of the loan tenure; the benefits could translate to a 2.5 lacs INR depending upon the tax slab of the buyer.

India is versatile in terms of politics, government, and has tons of schemes and policies in place. The madness is never-ending if we start talking about the government policies of every state. The Central Government has planted the Electric Vehicle seeds but are state government’s watering the plants?

Here are some commendable steps taken by a few states for the welfare of the EV industry. They are also in sync with the Central government’s vision and initiative for EVs.

State-wise GST & Subsidies benefits for Electric Vehicles


The state cabinet of Telangana approved the electric vehicle policy on august 5th 2020. The key features of this state policy are:

  • 100% exemption on road tax and registration fees on the purchase EVs- This is applicable for the first two lacs two-wheelers, 5000 four-wheelers and 20, 000 three-wheeler auto-rickshaws.
  • A capital subsidy of 25% of charging equipment is approved for the first 500 fast-charging stations and battery swap stations.
  • Duty exemption on power tariff provided to the public charging station for ten years.
  • Reimbursement up to 75% provided to private Electric vehicle charging providers and fast-charging equipment.

Telangana government has issued 1,425 crores and 775 acres for the development and set up for EV manufacturing units. The EV sales have increased by 23% in the year 2020, around 6000 four-wheeler EV cars and 6000 two-wheelers are making their journey every day and bringing a smile to the environment.

TAMIL NADU GST & Subsidies

Tamil Nadu’s agenda is to create a comprehensive EV ecosystem and has announced its Electric Vehicle Policy in 2019. The key features of this policy are:

  • The policy approved 50,000 crores towards EV manufacturing and infrastructure.
  • 100% exemption on Reimbursement on state GST, stamp duty, road tax, and electricity tax till December 12th, 2022.
  • Initiative on waving off registration charges.
  • To create 1.5 lac jobs in the EV industry.
  • An initiative to provide EV training to engineering students.
  • A charging station will be installed every 25kms of state and national highways.
  • 3/3 grid charging station set up in Chennai, Madurai, Selam, Trichy, Coimbatore, and Tirunelveli.
  • The initiatives taken by the TN government is quite impressive, especially the policy wherein training about Electric vehicles would be provided to the upcoming engineers. This is quite futuristic and will surely change the mindset of the youth and EV adoption will be a cakewalk in the future.


Delhi Chief Minister Arvind Kejriwal has announced a new Electric Vehicle policy on 7th august 2020 to promote a greener and pollution-free environment. The salient features of this policy are:

  • Creation of a state EV Fund.
  • Focus on the installation of the charging station and battery swap stations.
  • Registration Fees and Road Tax waived off on purchase of EV.
  • Appointment of an EV cell for spreading awareness on the EV ecosystem.
  • An initiative has been taken to transition 50% delivery vehicles to EVs by the year 2023 and 100% delivery vehicles to EVs by 2025 for E-commerce, Logistics, and Food Delivery Businesses.
  • An initiative is taken for scrapping the traditional auto- Rs 7500 will be provided to the auto owner and a subsidy of Rs 30000 will be provided to buy an Electric auto.
  • The subsidy is provided for goods carriers up to Rs.30000.
  • A 20% parking slots should be allotted to EVs in commercial and residential complexes.
  • Compulsory installation of charging stations in commercial and residential complexes.
  • Creating a battery recycling ecosystem.

Well, it is safe to say that Delhi is one of the most competitive states in India and they are winning the race when it comes to the promotion of Electric Vehicles.

GUJRAT GST & Subsidies

The Gujarat government has recently announced its Electric vehicle policy.

  • A subsidy of Rs 12,000 Rs for the first 10000 EV two-wheeler purchases.
  • A subsidy of Rs 48,000 Rs for the first 5000 EV three-wheeler purchases.
  • Rs 50 lacs issues for installation of EV charging stations.

The Gujrat government is aiming to bring about 1 lac EVs on road by 2020. However, no initiative has been taken to provide any incentives for an individual buyer in terms of tax and fee waivers.


The Maharashtra government has announced its EV policy in 2018. The main aim of the policy was to make the state a preferable investment hub for global manufacturers and investors. The key features of this policy are:

  • The First 1000 Electric bus buyers will be eligible for user subsidy for a five-year duration.
  • Charging stations can be installed on petrol pumps subject to regulations.
  • Rs.25000 crore investment issued towards EV ecosystem.
  • The vision is to increase the number of registered Electric vehicles to 5 lacs.
  • To create job opportunities for 1,00,000 people in the EV industry.

Know more: How to set up an EV charging station in India? A step-By-Step guide with pricing.


The EV butterfly has come out of the cocoon and is searching for a safe place to land. The problem for the butterfly here is to land safely and hold the position for eternity. Although each state government has indeed taken some marvelous initiative towards the betterment of the EV industry, the issue which is brewing is to hold consumer attention. Different state policies create confusion in the consumer’s minds. Right now, the EV industry is gliding through uncertainty, chaos, and change. If a pan India EV policy can be put in place by the Indian Government, then the transition for the EV industry will be with ease and grace.

EV Duniya editorial: This article is written by Chitrangada Das

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  3. Interested in setting up EV Charging Station in Bihar

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