A government tax panel has proposed a sharp hike in GST rates on luxury electric cars, a move that could impact global players like Tesla and BYD as well as local automakers.
Currently taxed at 5%, the panel has recommended:
- 18% GST on electric cars priced between ₹20 lakh and ₹40 lakh
- 28% GST on EVs priced above ₹40 lakh
The rationale is that these vehicles largely serve the upper-income segment and are often imported rather than manufactured locally.
GST Council Meeting on September 3–4
The recommendations will be placed before the GST Council, chaired by Finance Minister Nirmala Sitharaman, during its upcoming September 3–4, 2025 meeting. The session is expected to discuss rationalisation of taxes across 175 goods and services, marking the biggest overhaul since GST’s rollout in 2017.
Reports suggest that the government may even introduce a new 40% GST slab for premium EVs.
Impact on Automakers and Market
The proposal immediately shook the market:
- Nifty Auto Index dipped 0.5%
- Mahindra & Mahindra fell nearly 3%
- Tata Motors dropped 1.2%
Luxury EV makers Tesla, BYD, Mercedes-Benz, and BMW may face higher costs, while domestic leaders Tata Motors (40% market share) and Mahindra (18%) could also be affected.
India’s EV sales grew 93% between April–July 2025, reaching 15,500 units, but they still make up only about 5% of total car sales.
The government says low taxes incentivise EV adoption but stresses that higher-priced EVs should face higher taxation to balance revenues.