The burgeoning electric vehicle market in India is facing potential headwinds as a proposal to increase the Goods and Services Tax (GST) on premium EVs gains traction. A group of ministers has proposed raising the GST on electric cars priced above ₹20 lakh from the current 5% to 18%. While the GST Council has yet to make a final decision, the suggestion has already triggered concerns among automotive companies and consumers.
Tata Motors and others are voicing worries. Shailesh Chandra, MD of Tata Motors Passenger Vehicles and Tata Passenger Electric Mobility, pointed out the substantial advancements made by EVs in India, where the on-road costs of EVs are now nearly on par with internal combustion engine (ICE) vehicles in many SUV categories.
The expanding charging infrastructure, with over 24,000 public charging stations, and the increasing availability of EVs with a practical range of up to 500 kilometers, have also driven growth. The 5% GST slab is viewed as vital in fostering consumer confidence. An increase in the tax rate could impede EV sales and adoption.
Mahindra & Mahindra believes the 5% rate provides crucial price equilibrium, particularly in the ₹10-40 lakh segment. MG Motor India advocates for zero GST, emphasizing the importance of simplifying charging infrastructure and home charging.
Mercedes-Benz India’s MD, Santosh Iyer, predicts that entry-level luxury EVs may be the most vulnerable. Although high-end buyers are less price-sensitive, the current low tax rate has assisted in achieving sales targets. July 2025 witnessed a 93% year-over-year surge in electric car sales in India, with 15,528 EVs sold.