To Boost Indigenous Manufacturing, Government Reduces Customs Duty on EV Components

In a move that could significantly influence the pace of EV adoption in the country, the government has reduced the applicable customs duty on parts and components of electric vehicles.

The government has lowered the customs duty on import of EV components to 10-15 percent. So far, EV components imported for assembly in India attracted import duty of 15-30 percent. However, with this move, the assembled parts and components will now attract a duty of 15 percent and above up to 60 percent.

The Central Board of Indirect Taxes and Customs (CBIC) has created a separate category for EV components.

According to the CBIC, “Electrically operated vehicles, if imported as a knocked down kit containing all the necessary components (parts or subassemblies) for assembling a complete vehicle with disassembled battery pack, motor, motor controller, charger, power control unit, energy monitor contractor, brake system, electric compressor not mounted on chassis will attract a duty of 10 percent.” On the other hand, “Electrically operated vehicles, if imported as a knocked down kit containing all the necessary components, parts or subassemblies, for assembling a complete vehicle with pre-assembled battery pack, motor, motor controller, charger, power control unit, energy monitor contractor, brake system, electric compressor not mounted on a chassis or a body assembly, will attract a duty of 15 percent.”



Other combinations will attract a duty of 25 percent, according to the notification. Battery pack for use in the manufacture of EVs or hybrid vehicles will attract a duty of 5 percent.

According to the CBIC, EVs and its components with cost, insurance, and freight value more than $40,000 will attract 100 percent duty, while those with value less than $40,000 will attract 60 percent duty.

This is one of the many positive developments that have recently occurred in India’s EV sector. To propel the growth of EVs in India, the government previously slashed applicable rate of the Goods and Services Tax (GST) on lithium ion batteries. The government is also planning to subsidize EV charging infrastructure.

Many states have geared up for the uptake of EVs as a means of mainstream mobility and others have initiated plans to develop EV manufacturing hubs. India is a price-sensitive country and for EVs to appeal to a larger consumer base, the cost needs to go down by a lot. States have their own policies, the reduction in taxation will be complimentary.

Recently state cabinet of Uttarakhand approved a policy to promote the adoption of electric vehicles in the state, while also incentivizing those who want to foray into EV manufacturing. The Delhi government released its draft Delhi Electric Vehicle Policy to improve Delhi’s air quality by bringing down the emissions from transport sector.

Previously, Mercom reported that EV sales so far has been inconsistent under the Faster Adoption and Manufacturing of (Hybrid) and Electric Vehicles (FAME) program. While some states have made good progress, many states are well-behind in EV adoption.

The reduction in component cost due to reduction in customs duty will make the adoption of EVs faster in cost-conscious India.

Image credit: Mahindra