At present, demonetisation has created an unfavourable environment for the auto industry on the whole. The auto industry is pinning hope on the upcoming Union Budget 2017 as it will uplift consumer sentiment and infuse a positive environment for the auto industry, including electric vehicles.
Automobile industry players are working toward extension of the incentive scheme for electric mobility under the FAME scheme and hoping for a positive response from the upcoming Union Budget with a long term plan for at least the next five years. This extension will lead to achieving India´s electric vehicle target, which in turn will undoubtedly help in reviving of the industry.
The government launched the FAME India scheme in 2015 to encourage eco-friendly vehicles. It predicted a quantum of Rs 795 crore as support for the first two fiscals. Faster adoption and manufacturing of hybrid and electric vehicles in India under FAME falls under the National Electric Mobility Mission Plan.
Those companies who are locally manufacturing vehicles can expect benefits because of cost advantage due to lower taxation. GST will uplift the electric vehicle industry on the taxation front as it will soak up many of the currently levied state, Central government and local body taxes.
On the whole, cost of manufacturing vehicles will be reduced by easing the cascading effect of tax-over-tax. This easy and consistent tax structure will simplify the way of doing business for those in the manufacturing industry. As far as the electric vehicle industry is concerned, the suppliers, manufacturers, dealers, and particularly the customers who will get the utmost benefit.
Furthermore, GST will transform India into one market. The government will infuse a positive spirit in the economy and bring in a lot more efficiency in operations, as compliance burden on the whole will reduce. From the perspective of indirect tax, the entire country will be perceived as one market, which will lubricate operational competence.
GST is extremely beneficial as far as the electric vehicle industry is concerned. The industry as a whole is appreciating the Government of India and political parties for carrying the GST baton and taking it forward. Implementation of GST will fuel the growth of the electric vehicle industry. In the current scenario, some states are still charging heavy taxes on electrical vehicles, whereas some states are charging around 5 per cent. Considering all goes well, it is expected that the GST rate should reduce the total tax burden on electric vehicles. Under this favourable climate, the GST rate is expected to be in the lowest possible slab.
Considering the unfavourable environment for the auto industry on the whole due to demonetisation, we had all pinned our hope on the Union Budget. The good news for the sector is that GST will go as scheduled as the government has taken two tectonic policy initiatives - passage of GST Bill and demonetisation. The GST implementation is a positive for the auto sector on the whole.
We are certain that positive sentiments will be restored, as it bears good tidings for the electric vehicle industry and the sector overall.