Union Budget 2019 makes EVs cheaper, petrol and diesel see Rs 2 hike

by Nilesh Wadhwa 05 Jul 2019

The Union Minister for Finance and Corporate Affairs, Nirmala Sitharaman departs from North Block to Rashtrapati Bhavan and Parliament House. (Image: PIB)

The first full Union Budget by the newly elected NDA government was today presented by Finance Minister Nirmala Sitharaman. The Indian automotive industry, which has been under considerable stress arising out of eight continuous months of sales decline, was looking forward to some support from the government to help kick-start growth.

The Budget, however, does not have much for the IC-engine driven automobile industry. In fact, users of fossil-fueled vehicles now will have to pay Rs 2 more per litre of petrol and diesel due to the imposition of the proposed ‘special additional excise duty and road and infrastructure cess’ on both of these two fuels. Is it a case of polluter pays? That buyers of conventional fossil-fueled vehicles pay more to offset costs for buyers of electric vehicles?

The government’s mood is clearly on promoting electric mobility. To drive higher adoption and sale of electric vehicles, the finance minister announced that GST on EVs will be brought down to five percent from the existing 12 percent. In addition, Ms Sitharaman also said that on a purchase of an EV, users will get an "upfront incentive" and an additional income tax deduction of Rs 150,000 on the interest paid on loans for the green vehicles. To further drive EV manufacturing in India, the government has now exempted customs duty “on certain parts”, which would very well see a mixed-bag response from the industry. The government also envisions the country as becoming a manufacturing hub for EVs and EV batteries.

The government also announced inclusion of solar storage batteries and charging infrastructure in the Make in India scheme to drive economic growth. The soon-to-be-launched scheme will invite global companies through a transparent competitive bidding to set up mega-manufacturing plants  in sunrise and advanced technology areas such as semi-conductor fabrication  (FAB), solar photo voltaic cells, lithium storage batteries and solar electric charging infrastructure, among others. Such companies will be given investment linked income tax exemptions under Section 35 AD of the Income Tax Act, and also other indirect tax benefits.

Meanwhile, reiterating the commitment made under the interim Budget in February 2019, where the government had proposed no income tax for individuals having an income of less than Rs 500,000 per annum, the finance minister confirmed the same. This move could translate to the middle class having an increase on their disposable income as well as saving capabilities, which could translate to a pick-up in demand for two-wheelers, entry-level vehicles as well as tractors mainly in rural India.

What's more the common man who has been witnessing the stress of high fuel prices the government has now proposed an increase in special additional duty and road and infrastructure cess on diesel and petrol by Rs 1, which it says will help drive infrastructure growth. 

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