5% GST: The 56th GST Council meeting of New Delhi held on September 3-4, 2025. It came as positive news for India’s electric vehicle (EV) sector. It was finally decided that the Goods and Services Tax (GST) on all electric vehicles will remain at a low value of 5%. Effective from September 22, 2025, under the new tax policy.
What the Decision of 5% GST Means for Electric Vehicles?
The 5% GST rate continues for all types of EVs. From passenger vehicles to two-wheelers, three-wheelers, and even luxury electric cars over ₹20 lakh. This keeps EVs relatively low-cost in contrast to traditional as well as hybrid vehicles. With much higher GST rates between 18% and 40%.
Major Highlights of the 5% GST Policy for 2025:
- All electric vehicles at 5% GST, irrespective of price segments
- Increased GST on petrol, diesel, and hybrid cars (up to 40%)
- Policy with an objective to promote quicker EV adoption and clean mobility objectives
Santosh Iyer, Managing Director and CEO of Mercedes-Benz India, said. “Retaining the 5% GST on electric vehicles will be crucial to encouraging the development of the EV market. Supporting India’s move towards an environmentally friendly transport future.”
Why This GST Rate Matters
- Price Competitiveness: Low GST makes electric vehicles cheaper than their ICE equivalents. Easing one of the biggest hurdles towards EV buying decisions.
- Increasing EV Sales: India’s EV sales have moved beyond 100,000 units in fiscal year 2024-25. Reflecting increased customer interest and acceptance.
- Government’s Climate Aims: Facilitating EV uptake through supportive tax policy. The government is moving in line with its aim. To lower carbon emissions and encourage cleaner transport.
- Industry Momentum: Sustained GST rate encourages manufacturers to innovate. Introduce new EV models aggressively, building up the ecosystem.
Buyers Can Look Forward
- Higher electric vehicle availability across segments
- Tax savings-backed competitive pricing
- Growing infrastructure support in the form of charging points for EVs
- Positive changes in public attitude towards sustainability
ELCTRIK Speaka
Maintaining GST at 5% on electric vehicles reinforces India’s desire for a greener, cleaner automotive future. It provides a resounding impetus to EV makers and consumers alike. Bolstering the momentum required for the nation to fulfill its ambitious electric mobility goals.
