Heavy Industries Ministry Proposes Reducing Customs Duty On Electric Vehicles Parts

In continued tinkering with the policy on EV’s, more in the hope that something will finally click, the Ministry of Heavy Industries and Public Enterprises has proposed reducing customs duty on parts of electric vehicles which are currently not exempt from import tariff to the Department of Revenue. The ministry has also suggested defining semi-knocked down and completely knocked down kits used for assembling EVs for streamlining of customs duty. The department of course hopes this will give a boost to manufacturing.

At present, key components for electric vehicles such as the battery, controller, converter, charger, energy monitor, electric compressor, and motor, are exempted from any kind of customs duty. While on the other hand, parts that include metals and plastics attract a 28 percent basic customs duty.

“We have proposed a definition for completely knocked down (CKDs) and semi-knocked down (SKDs) kits for EVs along with a tax structure conducive to increase their presence on Indian roads. However, we will not touch the parts attracting zero percent duty,” a senior government official told the press.

The tax structure scheduled over a period of one year was proposed by the Heavy Industries Ministry to the Finance Ministry in a meeting last week and is expected to be rolled out as apart of the highly anticipated second phase of the Faster Adoption and Manufacturing of Electric (& Hybrid) Vehicles (FAME) India scheme along with a Rs 5,500 crore outlay entailing subsidies for all categories of electric vehicles.

“The idea is to encourage big original equipment manufacturers to bring CKD and SKD kits in India so that they can be assembled here and enhance the visibility of EVs. In order that Make in India gets a boost and does not suffer we have suggested sunset clauses,” said an official.  At this stage, we could not confirm if this will benefit a brand such as Tesla, which saw serious interest from India for its Model 3 bookings.

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The Heavy Industries Ministry had drawn up the blueprint for the second phase of FAME India scheme and received the nod for sanction of Rs 5,500 crore from the expenditure finance committee (EFC) under the Finance Ministry in September. However, in October the ministry extended the first phase of the scheme for the fourth time for a period of six months.

More recently, the ministry announced that the government had agreed to increase the outlay for the first phase of the FAME scheme by Rs 100 Crore. The total outlay for the programme which hopes to supplement mass adoption of electric vehicles in the country now stands at Rs 895 crore.