Electric vehicle makers have urged the government to correct the inverted duty structure and preserve a clear GST advantage for EVs, warning that recent tax changes for internal combustion engine (ICE) vehicles have narrowed the price gap and weakened the total cost of ownership benefit of electric mobility.
While EVs continue to attract 5 per cent GST, key components such as power electronics and magnetic cores are taxed at 18 per cent, creating a cost imbalance for domestic manufacturers, industry executives said ahead of the Union Budget.
“GST on EVs and chargers remains at 5 per cent, but critical components are still taxed at 18 per cent, creating a clear cost imbalance for domestic manufacturers,” said Navneet Daga, Co-founder and CEO, Zenergize told PTI. Aligning these rates and extending schemes such as PM e-Drive to cover charging infrastructure would significantly strengthen India’s EV ecosystem, he added.
Working capital strain
Rajat Mahajan, Partner, Deloitte India, said the inverted duty structure (IDS) continues to hurt manufacturers as most inputs attract higher GST than finished vehicles. “This disparity leads to accumulation of input tax credit and working capital strain,” he said.
He noted that although GST on auto parts was cut from 28 per cent to 18 per cent in September 2025, the gap with the 5 per cent rate on EVs persists. “Non-availability of refunds on ITC related to capital goods further adds to production costs in this capital-intensive industry,” Mahajan said, calling for policy measures to create a more conducive manufacturing environment.
Protect GST edge for EVs
Saurabh Agarwal, EY India Partner and Automotive Tax Leader, cautioned that ICE vehicles were regaining momentum under GST 2.0 at a time when global trade tensions are rising. “It is important to protect a clear GST advantage for EVs, including on charging infrastructure, charging services and battery swapping, to keep EVs affordable and investments viable,” he said.
Agarwal suggested that incentives under PM E-DRIVE remain focused on public transport, shared mobility, commercial fleets and last-mile delivery, where electrification delivers the highest impact. “Faster adoption in these areas is essential to meeting the 30 per cent EV penetration target by 2030,” he added.
On the supply side, he recommended continuing duty exemptions on critical battery inputs until domestic cell manufacturing under the PLI scheme reaches scale. Strong state-level support for demand, supply and R&D will be crucial to sustain affordability and innovation, he said.
Industry players believe a correction in GST structure, combined with targeted incentives for charging and battery infrastructure, will be decisive in maintaining India’s EV growth trajectory.
