The third — and least likely — scenario involves a flat GST reduction along with removal of the cess, which would simplify the tax system but slash nearly half of auto sector GST revenues.Electric vehicle (EV) manufacturers could lose their pricing edge if the government goes ahead with proposed changes to the Goods and Services Tax (GST) regime, according to a report by HSBC Investment Research.
The Centre is considering scrapping the 12 per cent and 28 per cent GST slabs, with support from the Group of Ministers (GoM), Bihar Deputy Chief Minister Samrat Choudhary said on Thursday, reports ANI. While the move is aimed at simplifying the tax structure, it could tilt the market in favour of petrol and diesel vehicles.
“EV players will face a disadvantage if taxes are reduced on ICE vehicles,” the report noted, warning that it may slow the pace of EV adoption in India.
HSBC outlined three possible outcomes. In the first, GST on small cars may be cut from 28 per cent to 18 per cent, with larger vehicles moved to a new 40 per cent slab without cess. This could reduce prices by about 8 per cent for small cars and 3-5 per cent for bigger ones, while benefiting two-wheeler makers the most. The estimated revenue loss for the government would be about $4-5 billion.
A second scenario projects a flat GST cut to 18 per cent across all vehicle categories, retaining cess, leading to a 6-8 per cent price reduction and a $5-6 billion revenue hit.
The third — and least likely — scenario involves a flat GST reduction along with removal of the cess, which would simplify the tax system but slash nearly half of auto sector GST revenues.
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