A lower flat rate of tax across electric vehicle manufacturing and tax holidays for local R&D will help India become self reliant in EV technologies, entrepreneurs say
A view of the new Electric Vehicle charging station at 11kV substation in Narwana Road, near Swati Apartment, Patparganj, on July 18, 2020 in New Delhi, India; Image: Raj K Raj/Hindustan Times via Getty Images
India has a growing ecosystem of startups manufacturing electric vehicles and components such as batteries and battery management systems. Entrepreneurs building these ventures are enthused by the government’s steps thus far to promote clean energy in the country, but they believe more can be done to encourage the businesses as well as boost demand for electric vehicles.
“The next major step of the government should be introducing a ‘National Green Cess on polluting vehicles and utilise it to accelerate electric mobility and invest in demand subsidies,” Akhil Aryan, founder and CEO of ION Energy in Mumbai, wrote to Forbes India in an email. ION Energy makes sophisticated battery management systems for batteries that power electric vehicles, as well as energy storage systems, with customers in 15 countries.
Demand subsidies are incentives offered to consumers to generate demand. The government can use the green cess to “front-load” the incentives—meaning provide them upfront—to customers and bring down the cost of purchase which will help rapid adoption of electric vehicles, Aryan said. Society of manufacturers of electric vehicles, an EV sector lobby, has suggested that the government should bring the green cess under the Swachh Bharat Abhiyaan campaign to keep the momentum going, and keep the buzz alive, he added.
The government can provide tax breaks for a specific period or provide free recharging once a month to those who go in for green vehicles and contribute their bit to saving the environment—as successfully demonstrated by Norway, he said.
Simplifying the GST (goods and services tax) structure by combining the multiple slabs into a single slab will also help bring down the cost of electric vehicles and their parts. Currently, the GST for batteries is 18 percent, tyres and lights 28 percent, and other parts 18 percent. Finished electric vehicles attract a GST rate of 5 percent.