The GST on electrically-powered vehicles

In a bid to bring down the pollution, the Government is rigorously pushing the manufacture and usage of electrically powered vehicles in India. But, the Goods and Services Tax (GST) on these happen to be very confusing. The existing article clarifies on the same issue by describing classification, GST applicability and latest advance ruling pertaining to the issue.

GST applicability and classification pertaining to electrically-powered vehicles

After the advent of GST, the electrically-powered vehicles' classification has become a bit problematic in the market. The classification is assessed as-

According to notification no. 1/2017- Central Tax (Rate) dated 28th June 2017, heading 8703 comprises all the motor cars and other motor vehicles aimed at transporting people, station wagons and racing cars. But, the said heading doesn’t comprise an account of goods coming under heading 8702 and cars for a differently abled person. It is to be noted that the goods categorized under heading 8703 can be taxed @28% GST (14% CGST and 14% SGST).

Going forward, notification no. 1/2017- Central Tax (Rate) dated 28th June 2017 has specifically covered Electrically-powered vehicles (comprising two and three-wheeled electric motor vehicles) under heading 87. Here, the classified goods are taxable @12% GST (6% CGST and 6% SGST).

According to the Ministry of Finance's new notification no. 12/2019- Central Tax (Rate) dated 31st July 2019 (effective from 1st August 2019) pertaining to electrically operated vehicles. The notification also categorized the Electrically-powered vehicles (comprising two and three-wheeled electric vehicles) under heading 87. But, moved the Schedule and as a result, the goods became taxable @5% GST (2.5% CGST and 2.5% SGST).

To give more clarity, the above-mentioned notification offered the definition of ‘Electrically Operated Vehicles’. The definition comprises vehicles operated only on electrical energy sourced externally or from one or more electrical batteries fixed to similar road vehicles. The definition covers even e-bicycles.

In reality, the Ministry of Finance gave the definition of ‘Electrically Operated Vehicles’ to make the classification convenient. But, it caused confusion. The Confusion peaked with categorization of electrically-powered vehicles having a battery pack and not having a battery pack. To tackle the above confusion, M/s. Hooghly Motors Pvt. Ltd. filed for advance ruling in the matter which is given below.

Recent judicial rulings in the matter

An advance ruling regarding the categorization of electrically-powered vehicles was filed by M/s. Hooghly Motors Pvt. Ltd. to the West Bengal Authority. The authority dealt with the application and offered the judgement in August 2020. The summary of the rulings happen to be:

As per the application, the applicant needs an answer to the following two questions-

If the three-wheeled vehicle can be slotted as an ‘electrically operated vehicle’ classifiable as per heading 8703 if the vehicle is given with a battery pack? and

What about the categorization of an ‘electrically operated vehicle’ if supplied devoid of a battery pack?

Rulings given by the West Bengal Authority-

An electrically powered three-wheeled vehicle is operated solely on electrical energy which is tapped from an outside source or one/ more electrical batteries fixed to the vehicle.

If the battery back is taken back, the vehicle won't be the three-wheeled electrically run vehicle.

E-rickshaws or electrically powered three-wheeled vehicles are categorized under heading 8703 90 10.

A three-wheeled electrically powered vehicle can be categorized under heading 8703 if it is fitted with the battery pack.

But, a three-wheeled electrically run vehicle will be categorized under heading 8706 in case it does not have the battery pack.

Summary

The classification and taxation pertaining to the electrically-powered vehicle under GST is given below-

Electrically run Vehicle fitted with battery pack (comprising two-wheeled electric vehicle and three-wheeled electric vehicle)-

According to notification no. 12/2019-Central Tax (Rate) dated 31st July 2019, the same can be classified under heading 87 and levied with 5% GST.

A three-wheeled motor vehicle along with battery pack-

According to the newest judgement of West Bengal Authority for Advance Ruling, the same is classifiable under heading 8703. As a result, the same does not attract any GST.

A three-wheeled motor vehicle devoid of battery pack-

According to the fresh judgement of West Bengal Authority for Advance Ruling, the same can be categorized under heading 8706. Accordingly, the same can be charged with 28% GST.

E-rickshaws or electrically operated three-wheeled vehicles-

According to the recent judgement of West Bengal Authority for Advance Ruling, the same can be classified under heading 8703. Accordingly, the same has no GST