Government Incentives for Buying Electric Vehicles

Government Incentives for Buying Electric Vehicles

A lot of people are hesitant to purchase electric vehicles (EVs) because the capital cost is higher compared to its internal combustion engine (ICE) counterpart. However, what they don’t know is that purchasing an EV is one of the smartest investments they could make.

The Government of India provides a slew of incentives to encourage people to buy electric vehicles. They are as follows.

  • Purchase Incentives- Buyers get direct discounts for purchasing an EV, making electric vehicles more affordable to people. These incentives are given either by the manufacturer or by the government, and may be in accordance to the cost of the battery.
  • Lower GST Rate- A vehicle is considered an item of luxury by the government, and hence the GST rates are applied as such. However, to promote the purchase of EVs, the government has lowered the GST rate. The GST rate applied to EVs is 5%, while that for buying an ICE is a whopping 28%! GST is shared equally by the central government and the state governments. Some states offer a 100% reimbursement of the SGST paid by the owner, whereas some states offer partial reimbursement.
  • Coupons- You can now get coupons when you purchase an EV and you can get a reimbursement by the government later. The coupon amount may vary according to the category or the price of the vehicle. It is important to note that coupons may be available only for a certain period of time.
  • Interest Subvention- The rate of interest is lowered while availing a loan to buy an EV. Different states have different rates of interest subventions in place for purchasing an EV.
  • Road Tax Exemption- All vehicle buyers have to pay road tax at the time of purchase to the state government. Road tax varies from state to state, and is also dependent on whether it is for personal use or commercial use. It is further differentiated into slabs, based on the cost and fuel needs of the said vehicle. However, this is not the case for EVs. EV buyers get a road tax exemption and hence, it is waived off at the time of purchase.
  • Registration Fee Exemption- Just like road tax, a one-time registration fee has to be paid at the time of purchase, and is dependent on the type of usage for the vehicle. This fee is waived off when you purchase an EV.
  • Income Tax Benefits- The tax amount payable to the government is reduced. In 2019, the central government announced a benefit of Rs. 1,50,000 on interest paid on those loans taken to buy EVs.
  • Scrapping Incentives- The govt. provides incentives for scrapping and de-registering old ICEs, provided they are not replaced with another ICE. These scrapping incentives further disincentivise the usage of ICEs and purchase of new ones. The scrap value could be provided in the form of a fixed amount, a part of the ex-showroom price, or a rebate on the road tax and registration fee of a new EV.
  • Other Incentives- Other incentives include interest-free loans and top-up subsidies. Additionally, special incentives for 3-wheelers are also in place.

The subsidies, exemptions, and the rate of interest vary from state to state. Some states waive off 100% of the registration fee, whereas some states are providing a 50% waiver. Depending on the kind of EV purchased (2-wheeler, 3-wheeler, etc.), the Govt. offers different amounts as coupons, with a maximum price fixed in each EV segment. The same is the case for other incentives as well.

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