Interim budget: EV players expect GST reduction, clarity on FAME III scheme
As the interim Union Budget 2024 approaches, the Electric Vehicle (EV) manufacturers are expecting multiple measures to propel the industry forward. Some of them want support in the Goods and Services Tax (GST) rules while some others look for more clarity on the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME III) scheme. They feel that such kind of measures are essential for further strengthening of the EV ecosystem.
“Anticipation surrounds updatеs on thе potential FAME 3 schеmе, PLI sops, and revisions to GST for two-whееlеrs. Wе hopе for a continuation of grееn mobility еmphasis, building on thе govеrnmеnt’s undеrstanding of thе symbiotic rеlationship bеtwееn еnvironmеntal sustainability and еconomic growth. Thе reduction in customs duty on EV parts in thе previous budget spurred local manufacturing, and similar amеndmеnts arе еxpеctеd in thе 2024 budgеt. Calls for a uniform 5 per cent GST on all EV sparе parts, alignеd with thе 5 per cent GST on vеhiclеs, rеsonatе within thе industry, as we aim for a morе еquitablе tax structure,” an industry expert said.
He further added that there are expectations that the budgеt unveils a comprehensive policy framework for the EV segment addressing licensing, safety standards, and insurance norms tailorеd for еlеctric vеhiclеs. “To fostеr cost reduction, a focus on localizing battеry manufacturing is crucial, with incеntivеs for battеry manufacturing units and a robust supply chain for EV components,” he added.
There are also expectations on better clarity and insights on the much-anticipated FAME III scheme. “A well-defined roadmap in this regard would provide manufacturers with clarity, enabling strategic planning and fostering investor confidence. The seamless transition from FAME II to FAME III is essential for the industry’s progressive trajectory, and we hope the budget will provide a comprehensive vision for the future of electric mobility. With the rising pollution levels among the major cities in India, we need faster adoption and promotion of EVs as a sustainable alternative,” another expert pointed out.
Many stakeholders in the EV segment pointed out that the infusion of funds within the FAME scheme highlights the government’s dedication to promoting the widespread adoption of EVs. However, it’s crucial to acknowledge battery swapping’s pivotal role in this growth.
“Currently a notable disparity exists in the GST rates between EVs sold with fixed batteries (taxed at 5 per cent) and the lithium-ion batteries utilised for swapping purposes (taxed at 18 per cent when sold separately). With the Interim budget announcement in February, we are expecting GST parity for EV batteries used in swapping—crucial for competitive pricing—and they should hopefully align with the 5 per cent bracket to fortify the EV landscape. We also hope that the registration process and subsidy mechanism for battery swapping vehicles will be defined under the guidelines of the FAME scheme,” another industry expert said.
Many other players in the EV segment feel that the favourable government policies and confidence in the sector has led to a surge in EV sales and production, exiting the nascent stage and with the upcoming budget there are hopes for an equitable landscape with subsidies and incentives, across state and centre. This is expected to not only to increase production, but also sales, usability and support.
“The extension of FAME II to FY 25 is in itself a great sign for the continued development of the industry. Additionally, the GST rate on batteries needs to be lowered from 18 per cent down to 5 per cent, in line with Battery EVs, which will bring battery swapping and battery subscription in line with traditional EVs, a much needed step. With regards to GST, there is also a need for parity of 5 per cent GST rate across states for charging, to enable faster adoption of EVs and infrastructure development, which we hope we will see in this budget,” another expert said.
With EV sales doubling from 2022 to 2023, reaching 89,137 units, the momentum is clear. EV players feel that the reduction of GST will significantly boost the growth of the sector.
“We urge a reduction in GST on lithium-ion battery packs and cells from 18 per cent to 5 per cent. Such a move will incentivize OEMs, fostering innovation and affordability in the sector. Additionally, the continuation of the FAME II Subsidy beyond its March 2024 expiration is crucial to sustain customer acceptance and support OEMs. Moreover, compulsory adoption of global ISO norms for battery swapping should be mandated by integrating voluntary IS standards into the Central Motor Vehicle Rules. This step will ensure quality assurance and uniformity in the EV industry, elevating standards for all stakeholders involved in the electric vehicle ecosystem. A forward-looking budget will not only propel the EV revolution but also solidify India’s position as a leader in sustainable mobility,” remarked by an expert.
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