India is all for Green Mobility and the government is pushing in all four directions to achieve the net-zero carbon emissions by 2070 and reduce the country’s carbon intensity by 45% by 2030. In terms of Green Mobility, the Government is leading on all fronts viz. Hybrids, Hydrogen Fuel Cells, Bio-Fuels, Electric vehicles (EV) and policy for scrapping of old vehicles.
India is already implementing Phase II of the Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India (FAME) Policy which specifically aims to encourage faster adoption of EVs by incentivizing EV ownership and electrify public transport systems. In this year, the government has allocated INR 51.72 billion towards FAME-II which is an 80% increase in budget allocation from preceding years.
There is no doubt that the two-wheeler market has been most benefited by this scheme. At the end of 2022, around 710,000 electric two-wheelers had availed FAME-II subsidies. Also, 7210 electric buses had been sanctioned and 2877 charging stations were approved. As per the Federation of Automobile Dealers Association, Retail sales of electric vehicles clocked 4,29,217 units during April 2021-March 2022, as compared to 1,34,821 units during April 2020-March 2021, which almost a 400% year on year increase.
Now, the government is encouraging India Inc. and the world to enhance and build EV manufacturing hubs in India by providing significant indirect benefits and discouraging EV imports by:
- Extending Customs duty exemption to import of capital goods and machinery required for manufacture of lithium-ion cells for batteries used in electric vehicles.
- Continuance of the concessional duty on lithium-ion cells for batteries till 31 March 2024
- Increase in Customs duty from 60% to 70% on premium vehicles with specific engine capacity and price that come in completely-built units (CBUs)
- Increase in Custom Duty from 30% to 35% on Vehicles (including electric vehicles) in Semi Knock Down (SKD) form.
Currently, the EV makers import expensive raw materials such as batteries from countries like China and South Korea. These duty exemptions will support EV manufacturers to import machinery and equipment required to manufacture batteries for the EVs at a reduced cost thereby reducing imports for raw materials. Further, this move may reduce the initial capital outlay for the battery manufacturers and is likely to reduce the manufacturing cost of the EVs. Further, the exploration and R&D activities to obtain rare minerals to manufacture batteries and enhance and upgrade battery technology is in full swing.
The government in the previous budgets has taken the various measures to make EV eco-system attractive viz. lower GST rates on EVs of 5 percent, allowing the sale of electricity for EV charging as an incentive for development of charging infrastructure; issuing notification exemptions of permits in case of battery-operated vehicles and establishing battery-swapping stations. Now, along with targeted boost to EV manufacturing, all these initiatives will surely make EVs more attractive for both consumers and manufacturers and give it a further push to this ever-expanding market.
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CA Shravan Suratwala is a Partner at S.M. Suratwala & Co., Chartered Accountants. Shravan has 8+ years of post-qualification professional experience in advisory, litigation and compliance areas of Corporate and International taxation. He has also worked three plus years in the field of Internal and Process Audit while pursuing chartered accountancy course.
Taher Telwala is currently pursuing his Chartered Accountancy course and is currently completing his internship with S.M. Suratwala & Co., Chartered Accountants, Pune.
The Author can be reached at contact@smsuratwala.com or shravan.suratwala@outlook.com
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