India’s electric vehicle market is booming, but a recent proposal regarding Goods and Services Tax (GST) is causing consternation among automakers. A ministerial group, tasked with evaluating GST rates, has recommended raising the GST on electric cars priced above ₹20 lakh from 5% to 18%. Although the GST Council has yet to make a final decision, the mere discussion is already impacting companies and consumer sentiment.
Industry leaders are expressing their concerns. Shailesh Chandra, MD of Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility, highlighted the significant progress EVs have made in India, with on-road prices in many SUV segments now comparable to internal combustion engine (ICE) vehicles.
The availability of over 24,000 public charging stations and the increasing availability of EVs with a real-world range of 500 kilometers have also contributed to the growth. The current 5% GST rate has been instrumental in building consumer confidence. An increase in this rate could hinder the growth of EV sales and adoption.
Mahindra & Mahindra noted that the 5% rate helps balance prices, especially in the ₹10-40 lakh segment. MG Motor India’s MD, Anurag Mehrotra, emphasized the importance of the lower rate for promoting EVs and called for zero GST, along with easier access to charging infrastructure and home charging solutions.
Mercedes-Benz India’s MD and CEO, Santosh Iyer, indicated that entry-level luxury EVs could be most affected. While luxury car buyers are less price-sensitive, the lower tax slab has been beneficial in boosting sales volumes. July 2025 saw a 93% year-on-year increase in electric car sales in India, with a total of 15,528 units sold.