Nikita Vashisht
Moneycontrol News
With an eye on promoting Modi government’s Make in India programme, Centre’s flagship scheme to expand domestic manufacturing, the government will levy higher custom duty up to 50 percent from April 1, 2020 to make imports of batteries of electric vehicles unattractive.
Under the recently approved Phased Manufacturing Programme to promote “indigenous manufacturing of electric vehicles, its assemblies and sub-assemblies and parts and sub-parts/inputs of sub-assemblies”, basic custom duty (BCD) on various categories of batteries will almost double from 2020.
According to a notification issued by Department of Heavy Industries, BCD of 50 percent will be levied on completely built units (CBU) of electric buses and trucks while a custom duty in the range of 25 to 30 percent will be levied on semi-knocked down (SKD) parts of electric 2W (private) and 3 and 4 or above Wheelers used as public transport. The current BCD on former is 25 percent and latter is 15 percent.
A flat 15 percent custom duty, up from 10 percent, will be levied on completely knocked down units (CKD) of private two wheelers and all other public transport.
Also read: Cabinet approves 5-yr plan for 'phased manufacturing' of EV batteries
CBUs refer to those vehicles which are imported as final goods and are in ready shape for sale, whereas CKDs refer to those high-end vehicles whose parts are officially imported from foreign countries and are assembled in the selling country. SKD refers to a situation where an importer imports vehicle parts in groups and then assembles the entire vehicle in the selling country.
Cabinet, headed by Prime Minister Narendra Modi, on March 7 had approved setting up of ‘Phased Manufacturing Programme’ (PMP) to support and promote “clean, connected, shared and sustainable” mobility solutions.
It had also approved setting up of National Mission on Transformative Mobility and Battery Storage for five years to “support setting up of few-large scale, export-competitive integrated batteries and cell manufacturing Giga plants”.
A statement released by the government said that the government “aims to promote indigenous manufacturing” of all components utilised in the “supply chain for manufacturing of electric vehicles”. The PMP scheme, which will be executed between 2019-20 and 2023-24, will be approved by the NMTMBS.
According to the latest notification released by DHI laying out details of the PHP scheme, battery packs and lithium-ion (Li-ion) battery cells used in accumulators for EVs will attract a BCD of 15 percent and 10 percent respectively April 1, 2021 onwards. Both of these components are charged 5 percent custom duty at present.
Also read: Cabinet approves Rs 10,000 crore package for phase II of FAME scheme
A notification by Central Board of Indirect Tax and Customs (CBIC), issued on January 29, 2019, increased custom duties on various components of electric vehicles.
An EV with disassembled battery pack, motor, brake system, and others which are not mounted on chassis will attract import duty of 10 percent, while an EV with assembled battery pack, and rest being same as the previous category will attract import duty of 15 percent, the notification read. A complete EV being imported will attract a duty of 25 percent.
Various sources aware of the move said that the idea behind such differentiation was based on the theory that “a product that led to value addition in India, in terms of job, should be least taxed while the product that led to no value addition in India should be taxed the most”.
Importing components to set up charging stations in India will also get expensive from 2021 as the government intends to increase custom duty on various components from nil to 15 percent.
BCD on AC/DC chargers, AC/DC motors, power control units, energy motors, contractors, brake system for recovering and electric compressor will attract a 15 percent custom duty from April 1, 2021.
The entire ecosystem around electric mobility is being developed after 14 (2017) and 15 (2018) of the 20 most polluted cities were found to be in India. Centre has pledged to decrease pollution levels in India by shifting to greener vehicles and converting 30 percent of vehicular count in India to electric by 2030.
Also read: FAME-II: Subsidies for EV makers will come with riders
Cabinet has approved a package of Rs 10,000 crore for the second phase of Faster Adoption and Manufacturing of Electric (& hybrid) vehicles (FAME) scheme (started in 2015) to subsidise sale of electric vehicles. The amount will be spent over a period of three years.
Under the second phase, focal point of the scheme is electrifying public transport and expanding charging infrastructure in the country.
“Through the second phase, the government proposes to give a push to electric vehicles in public transport and seeks to encourage adoption of EVs by way of market creation and demand aggregation,” DHI had told Parliament through a written response in early February.
The government has decided to set up 2,700 charging stations across metro, million plus cities, smart cities and cities across hilly terrain under FAME-II.
"Establishment of charging stations are also proposed on major highways connecting major city clusters, where stations will be available at every 25 km," government said. in a statement.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
