Budget FY2020 offers big boost through tax cuts on Electric Vehicles

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Sagging spirits in the renewable energy industry got a major boost in the FY2020 budget, with the Government of India offering income-tax rebates and tax cuts on electric vehicles. Finance minister Nirmala Sitharaman in her budget speech has proposed income tax deduction of up to INR150,000 on the interest paid on loans for buying EVs.

Further, the finance minister has moved to reduce the goods & services tax (GST) on electric vehicle purchases to 5%, compared with the existing rate of 12%. While the government wants electric vehicles to account for 30% of all passenger vehicle sales in India by 2030, electric cars account for less than 1% of new vehicle sales due to a lack of charging infrastructure and the high cost of batteries.

The finance minister also announced incentive schemes for setting up mega manufacturing plants of solar photovoltaic cells, lithium storage batteries, and solar electric charging infrastructure. Supporting infrastructure, such as charging stations, is another key for the success of EVs. While the budget did not elaborate on plans for setting up charging stations, the government had in March 2019 earmarked around INR1,000 crore for setting up charging infrastructure under the second phase of the FAME India Initiative.

Earlier in the interim budget announced on 1 February 2019, the Finance Minister had proposed a reduction in import duty on electric vehicles and no change in the budgetary allocation for renewable energy. These meager measures had received a lukewarm response from the renewable energy industry. The Society of Manufacturers of Electric Vehicles strongly felt a concrete action plan and a high dose of incentives are needed to relaunch the electric mobility mission in India.

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Date: 08.07.2019 | Source name: ET Energy World

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