GST Application on Electrically Operated Vehicles

With an aim to decrease the pollution, the Government is vastly promoting the manufacture and use of electrically operated vehicles in India. However, the Goods and Services Tax (GST) applicability on the same remains highly confusing. The present article tries to clarify the position by covering classification, GST applicability and recent advance ruling in the matter.

What is meant by GST on electrically operated vehicles?

"A three-wheeled motor vehicle is classifiable under HSN 8703 as an electrically operated vehicle, provided it is fitted with the battery pack. Otherwise, it will be classifiable under HSN 8706," the West Bengal AAR said in a recent ruling. HSN (Harmonised System of Nomenclature) 8703 classifies such vehicle for 'nil' levy, while HSN 8706 means GST at 28 per cent.

GST applicability of electrically operated vehicles

The classification is critically explained hereunder-

• As per notification no. 1/2017- Central Tax (Rate) dated 28th June 2017, heading 8703 includes all the motor cars and other motor vehicles designed for the transport of person, station wagons and racing cars, are taxable @28% GST (14% CGST and 14% SGST).
• Moving ahead, notification no. 1/2017- Central Tax (Rate) dated 28th June 2017 including two and three-wheeled electric motor vehicles under heading 87, are taxable @12% GST (6% CGST and 6% SGST).
• The Ministry of Finance issued a new notification no. 12/2019- Central Tax (Rate) dated 31st July 2019 (effective from 1st August 2019) dealing with electrically operated vehicles including two and three-wheeled electric vehicles under heading 87 were taxable @5% GST (2.5% CGST and 2.5% SGST).

As these vehicles are not classified under 8703 in the act of tax until installed with devices such as solar panels. The Authority of Advance Ruling eyes that a three-wheeled motor vehicle excluding the battery has no effective character and is similar to an electrically operated vehicle. Though the vehicle has not been fixed with the internal combustion engine. Most of the commercial vehicles for public transport including e-rickshaw. Nowadays, e-cabs, e-buses already operate their EVs under a battery swapping arrangement as it enables them to achieve a higher level of operational efficiencies without incurring any time at charging stations.