Applicability of GST on Electrically Operated Vehicles

The Government of India is actively promoting the manufacture and use of electrically operated vehicles to curb pollution. However, understanding the Goods and Services Tax (GST) levy on these vehicles can be complex. This article aims to clarify the classification, GST applicability, and recent advance rulings regarding electrically operated vehicles.

Classification and GST Applicability of Electrically Operated Vehicles

The classification of electrically operated vehicles under GST has been a topic of debate since the tax's inception. We explore this classification below:

According to notification no. 1/2017- Central Tax (Rate) dated 28th June 2017, heading 8703 includes all motor cars and other vehicles designed for transporting persons, such as station wagons and racing cars. However, it excludes goods under heading 8702 and vehicles for physically handicapped persons. Goods under heading 8703 incur a 28% GST rate (14% CGST and 14% SGST).

Meanwhile, the same notification categorically includes electrically operated vehicles under heading 87, subjecting them to a 12% GST rate (6% CGST and 6% SGST). Further clarifications were issued via notification no. 12/2019- Central Tax (Rate) effective from 1st August 2019, reducing the GST rate on these vehicles to 5% (2.5% CGST and 2.5% SGST).

Defining Electrically Operated Vehicles

This recent notification defines 'Electrically Operated Vehicles' as those powered solely by electrical energy from an external source or from one or more fitted electrical batteries. The definition also encompasses e-bicycles.

Despite attempts to simplify classifications, confusion persists, especially concerning vehicles supplied with and without battery packs. This led to an advance ruling request by M/s. Hooghly Motors Pvt. Ltd., which is discussed further below.

Recent Judicial Rulings in the Matter

M/s. Hooghly Motors Pvt. Ltd. approached the West Bengal Authority for Advance Ruling regarding the classification of electrically operated vehicles. In August 2020, the authority delivered its judgment, addressing two key questions:

Whether a three-wheeled vehicle, when supplied with a battery pack, is classifiable under heading 8703 as an 'electrically operated vehicle'?
How should an 'electrically operated vehicle' supplied without a battery pack be classified?

Key determinations from the ruling include:

A three-wheeled electric vehicle, powered solely by electrical energy from external sources or fitted batteries, is considered under heading 8703.
If the battery pack is removed, the vehicle ceases to be classified as an electrically operated vehicle under this heading.
E-rickshaws, or three-wheeled electrically operated vehicles, fit under heading 8703 90 10.
Without a battery pack, these vehicles are classified under heading 8706.

Summary

The GST classification and taxation for different configurations of electrically operated vehicles are summarized as follows:

Electrically Operated Vehicle with a battery pack (including two-wheeled and three-wheeled varieties) are classified under heading 87 with a GST rate of 5%, as per notification no. 12/2019-Central Tax (Rate).
A three-wheeled motor vehicle with a battery pack is classified under heading 8703, resulting in a NIL GST charge according to the West Bengal Authority for Advance Ruling.
A three-wheeled motor vehicle without a battery pack falls under heading 8706 with a 28% GST charge, following the same ruling.
E-rickshaws or three-wheeled electrically operated vehicles are classifiable under heading 8703 with a NIL GST charge, per the same authority's decision.

For businesses involved in exporting goods and services via electrically operated vehicles or any other transporter, understanding GST LUT regulations can be crucial. Need to know about the costing? Check out the GST LUT pricing details. For more accurate filing processes, learn about the GST LUT fees structure required to facilitate international trade.

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Frequently Asked Questions

Common questions about GST on Electrically Operated Vehicles.

According to the notification no. 12/2019-Central Tax (Rate) dated 31st July 2019, electrically operated vehicles (including two and three-wheeled electric vehicles) fitted with a battery pack are classified under heading 87 and are chargeable to 5% GST (2.5% CGST and 2.5% SGST).

As per the latest judgment of the West Bengal Authority for Advance Ruling, a three-wheeled electrically operated vehicle is classified under heading 8703 if it is fitted with a battery pack, and is chargeable to NIL GST. However, if the same vehicle is supplied without a battery pack, it will be classified under heading 8706 and chargeable to 28% GST.

The Ministry of Finance has provided the definition of 'Electrically Operated Vehicles' to simplify the classification. It covers vehicles which are run only on electrical energy derived from an external source or one/more electrical batteries fitted to such road vehicles. The definition also includes e-bicycles.

Yes, according to the judgment of the West Bengal Authority for Advance Ruling, e-rickshaws or electrically operated three-wheeled vehicles are classifiable under heading 8703, and are chargeable to NIL GST.

If an electrically operated vehicle is supplied without a battery pack, it will not be considered an 'Electrically Operated Vehicle' under the GST definition. As per the West Bengal Authority for Advance Ruling, such a vehicle will be classified under heading 8706 and chargeable to 28% GST.

With an aim to decrease pollution, the government is vastly promoting the manufacture and use of electrically operated vehicles in India. To achieve this, the government has reduced the GST rate on electrically operated vehicles fitted with a battery pack to 5%.

There was confusion regarding the classification of electrically operated vehicles which are supplied with a battery pack and those supplied without a battery pack. The Ministry of Finance provided a definition of 'Electrically Operated Vehicles' to clarify the position, but it added to the confusion.

M/s. Hooghly Motors Pvt. Ltd. applied for an advance ruling to the West Bengal Authority for Advance Ruling to seek clarification on the classification of three-wheeled electrically operated vehicles supplied with and without a battery pack. The authority provided a judgment to address the confusion.

As per notification no. 1/2017-Central Tax (Rate) dated 28th June 2017, motor cars and other motor vehicles designed for the transport of persons, station wagons, and racing cars classified under heading 8703 are taxable at 28% GST (14% CGST and 14% SGST).

The government has tried to simplify the classification of electrically operated vehicles under GST by providing a specific definition of 'Electrically Operated Vehicles' through the notification no. 12/2019-Central Tax (Rate) dated 31st July 2019. However, this definition has also created some confusion regarding the classification of vehicles supplied with and without a battery pack.