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GST Council Retains 5% GST Rate for Electric Vehicles, Boosts Clean Mobility Push
ByAinvest
Wednesday, Sep 3, 2025 1:45 pm ET1min read
The Goods and Services Tax (GST) Council has decided to retain the 5% GST rate on electric vehicles (EVs) to support India's clean mobility push. This means domestic and imported EVs, including those from Tesla and luxury brands like Mercedes-Benz and BMW, will continue to be taxed at the concessional rate. The decision aims to encourage the adoption of EVs and simplify India's tax structure.
The Goods and Services Tax (GST) Council has decided to retain the 5% GST rate on electric vehicles (EVs) to support India's clean mobility push. This means domestic and imported EVs, including those from Tesla and luxury brands like Mercedes-Benz and BMW, will continue to be taxed at the concessional rate. The decision aims to encourage the adoption of EVs and simplify India's tax structure.The council's decision comes after a panel proposed a significant increase in the GST rate for high-end electric vehicles. The panel suggested raising the tax to 18% for vehicles priced between 2 million and 4 million rupees ($23,000 to $46,000) and 28% for those above $46,000. However, the government decided to retain the 5% rate, citing the need to promote EV adoption and simplify the tax system [1].
The current EV market in India is small but growing rapidly. EV sales surged 93% to 15,500 units from April to July 2025, accounting for 5% of total cars sold during this period. The decision to maintain the 5% GST rate is expected to further boost the EV market by reducing the cost of ownership for consumers.
Domestic EV makers like Mahindra and Tata Motors may benefit from the decision, as their offerings above the 2-million-rupee range are limited. However, foreign EV makers with luxury offerings, such as Tesla, Mercedes-Benz, and BMW, will continue to face the 5% tax rate, which could impact their sales and profitability in the Indian market.
The council's decision is a significant step towards India's clean mobility goals and reflects the government's commitment to promoting sustainable transportation. The 5% GST rate on EVs is expected to remain in place until further notice, providing a stable tax environment for the EV industry.
References:
[1] https://www.cryptopolitan.com/india-mulls-hefty-tax-on-luxury-evs/
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