Budget 2025 expectations: EV industry seeks 5% uniform GST, incentives for domestic battery manufacturing

Budget 2025 Expectations: Ahead of the Union Budget 2025, scheduled to be presented by Finance Minister Nirmala Sitharaman on February 1, the electric vehicle (EV) industry expects the simplification of Goods and Services Tax (GST) and an inverted GST structure on raw materials. The last budget presented in July 2024 did not make any specific announcements for the EV sector.

Budget 2025: Uniform GST

According to Dinkar Agrawal, Founder, CTO & COO of Oben Electric, a 5 per cent GST must be applicable across all EV components.

“Simplifying the GST structure with a uniform 5 per cent tax across EVs, components, and charging infrastructure is essential to reducing costs and fostering growth,” Agrawal said.

Currently, 5 per cent GST is levied on EVs, EV batteries, and charging infrastructure, while 28 per cent GST is levied on spare parts and accessories. An 18 per cent GST is levied on EV maintenance and repairs.

Budget 2025: Inverted GST structure

An inverted duty structure in GST occurs when the tax rate on inputs is higher than the tax rate on output. This issue affects the EV industry’s working capital requirements.

“Resolving the inverted GST structure on raw materials will also ease working capital pressures and encourage sustainable manufacturing,” Agrawal pointed out.

Budget 2025: PLI schemes

According to Agrawal, the government must promote domestic EV battery manufacturing capabilities in the country by introducing performance-linked incentive (PLI) schemes.

“Performance-linked incentives for battery innovation and indigenous component manufacturing can further strengthen India’s Make-in-India push, positioning the country as a global leader in EV technology,” he observed.

Budget 2025: Incentives for customers

To promote EV sales in India, the government is urged to cut down interest rates on EVs and provide subsidies to potential buyers.

“On the consumer front, initiatives like reduced interest rates on EV loans and targeted subsidies can make electric vehicles more accessible, bridging the affordability gap,” Agrawal added.

Even though there were no significant EV-related announcements in Budget 2024, in September, the Centre announced a ₹10,900 crore electric vehicle subsidy scheme, the PM E-Drive. This marked the third phase of the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) policy, which aims to subsidise the purchase of over 1.6 million electric vehicles in India since 2015.

According to India’s climate goals, the country should have a 30 per cent market share of EVs by 2030.

Agrawal believes that the Union Budget 2025 is an important opportunity for the Centre to address EV transition challenges by dealing with manufacturing and consumer-related issues to achieve the 2030 goal.