GST panel against tax relief to EV charging stations

The fitment committee of the GST Council has recommended to maintain “status quo” in the current taxation structure of electric vehicle (EV) charging services, even as the industry is batting for complete exemption of the service from the indirect tax’s levy, or a reduction in rate from 18% to 5%, as per official sources.

Last month, industry body FICCI had called for a cut in EV charging services to make electric mobility affordable and competitive. FICCI’s electric vehicle committee chair Sulajja Motwani had highlighted variation in GST rates of EVs and related products/services, and had suggested its realignment.

She had said that while EVs are taxed under the 5% slab, replacement batteries as well as charging services are taxed at 18%. “The proposed changes (reduction in rate or exemption) will make EVs more competitive…and incentivize greater adoption,” she had said

The fitment committee, after reviewing the proposal, said that EV charging service “does not qualify as supplier of electricity nor as service” of distribution or transmission of electricity by an electricity transmission or distribution utility; and “hence no exemption from GST is available as per existing provisions.”

It also said that electricity for EV charging stations is being provided in most states at already subsidised rates, therefore, reduction in rates is not needed, the sources said. “After deliberations, fitment committee recommended to maintain status quo,” a source said, while adding that battery charging of other motor vehicles also attract 18% GST.

The proposal of the committee has been submitted to the GST Council for deliberations, and the Council may take up this matter in its next meeting, likely to be held after Budget, as per sources.

Shareen Gupta, partner, JSA Advocates & Solicitors said: “GST Council should consider reducing the applicable rate of GST on EV charging stations to 5%. Reduced rate of GST on EV charging services will go a long way in meeting the objectives of the recently launched PM e-Drive Scheme.”

Karthik Mani, partner-indirect tax, BDO India said that reduction in rate would further encourage the consumers to consider buying EVs more favourably as opposed to traditional ICE vehicles.

“Since EVs and most associated equipment are liable to GST at 5%, there is a rationale to reduce the incidence on charging as well. However, as a policy, the GST council has been very selective in reducing rate on services and typically it has been done with restriction on input credit,” said Pratik Jain, partner, PwC India.

Source:- Financial Express