The Indian tax panel proposes to impose high taxes on luxury electric vehicles, impacting car companies such as Tesla and BMW

According to Reuters, an Indian government document shows that an Indian tax panel has proposed a significant increase in consumption tax on luxury electric vehicles priced over $46000. This move may affect the sales of car companies such as Tesla, Mercedes Benz, BMW, and BYD in India.

Indian Prime Minister Narendra Modi is working to reform the country's tax system and encourage Indian citizens to purchase more local goods. At the same time, bilateral relations between India and the United States have deteriorated due to high tariffs. Previously, the Modi government had proposed a significant reduction in the Goods and Services Tax (GST), which is expected to lower the prices of various goods from shampoo to electronics.
This document detailing the recommendations of the Indian tax panel shows that the panel is responsible for providing tax rate recommendations to the Indian GST Commission, the governing body. Although the GST Commission in India has supported a large-scale reduction in tax rates for various goods in line with Modi's reform direction, the tax panel still proposes to increase taxes on electric vehicles.
The Indian tax panel recommends raising the GST rate on electric vehicles priced between INR 2 million and INR 4 million (approximately USD 23000 to USD 46000) from the current 5% to 18%; For electric vehicles priced over $46000, the Indian tax panel proposes to increase the GST rate to 28%. The document states that these high priced models are mainly aimed at the "upper class of society" and are mostly imported models rather than locally produced.
However, an Indian government source stated that the Modi government has also decided to completely abolish the 28% tax rate. This gives the Indian GST Commission two options: either to raise the tax rate on high-end electric vehicles to 18%, or to classify high-end electric vehicles under the "newly established 40% tax rate category for some luxury goods".
It is reported that the GST Committee in India is led by Nirmala Sitharaman, the Federal Minister of Finance of India, and its members include representatives from various states in India. The committee is expected to hold a meeting on September 3-4 to review the above proposal and has the final decision-making power. At present, the committee's secretariat has not responded to Reuters' inquiries.
After the above report was released, the Nifty Automotive Index in India turned down, with a drop of up to 0.5%; The stock price of Indian domestic car company Mahindra fell by nearly 3%, and the stock price of Tata Motors fell by 1.2%.
At present, the size of the Indian electric vehicle market is still relatively small. From April to July this year, electric vehicle sales accounted for only about 5% of India's total car sales. However, this segment of the market is growing rapidly: during the same period, India's electric vehicle sales increased by 93% year-on-year, reaching 15500 units.
The document detailing the recommendations of the tax panel states: "The popularity of electric vehicles in the Indian market is constantly increasing. Although the low tax rate of 5% is intended to incentivize the public to adopt electric vehicles faster, it is equally important for the government to send a signal that higher tax rates can be applied to expensive electric vehicles
This proposal may have an impact on Indian domestic electric vehicle manufacturers such as Mahindra and Tata Motors, but the number of models priced at over 2 million Indian rupees by these two companies is limited. Foreign car companies that focus on high-end electric vehicles will be hit even harder. Tesla recently launched its Model Y model in India, with a starting price of $65000; Meanwhile, Mercedes Benz, BMW, and BYD have also launched high-end luxury electric vehicles in the Indian market.
In July of this year, Tata Motors led the Indian electric vehicle market with nearly 40% market share, followed closely by Mahindra with a market share of 18%; BYD has a market share of 3%, while Mercedes Benz and BMW have a combined market share of 2%. At present, Tesla has accepted reservations in India, but has not yet started delivering vehicles.
In recent months, Tesla has opened two stores in India. It is worth noting that in previous years, Tesla CEO Elon Musk has repeatedly criticized India for imposing tariffs on imported cars that are too high (about 100%). And GST is an additional tax levied on top of these tariffs, which will further increase the cost of Tesla cars.