The GST Council has proposed allowing passenger transport and motor vehicle rental services using electric vehicles to opt for a lower GST rate of 5 percent, subject to restricted input tax credit, provided the cost of battery charging is included in the consideration.
The proposal covers passenger transport services as well as rental services of motor vehicles with operators where the service is supplied using an electric vehicle, the central government said in a release on October 8.
The move could provide a tax incentive for the use of electric vehicles in commercial passenger transport and rental services, potentially lowering the GST burden on such services compared with conventional vehicles.
The proposed 5 percent rate would, however, come with restrictions on the availability of input tax credit.
At present, 18 percent GST is applicable on passenger transport services and rental services of electic motor vehicles. The 18 percent GST includes the benefit of claiming ITC.
The charging cost would also need to be included in the consideration for the concessional rate to apply.