Key Takeaways
- All new electric vehicles (cars, two-wheelers, three-wheelers, buses) attract 5% GST with zero compensation cess in India.
- Petrol/diesel equivalents attract 28% GST + 1% to 22% cess, making EVs significantly cheaper on the tax front.
- EV chargers and charging station equipment also attract 5% GST. EV charging as a service attracts 18% GST.
- Lithium-ion batteries fitted with the vehicle at sale are taxed at 5%. Standalone/replacement batteries attract 18% GST.
- EV spare parts and accessories attract 28% GST, the same rate as ICE vehicle parts.
- ITC on EV purchases is blocked for most businesses under Section 17(5)(a). Exceptions: transport operators, driving schools, vehicle dealers, and rental services.
- PM E-DRIVE scheme (replaced FAME-II from October 2024) provides central demand incentives. Multiple states offer additional subsidies, road tax waivers, and registration fee exemptions.
What is the GST rate on electric vehicles in India in 2026? All new electric vehicles attract a concessional 5% GST rate with no compensation cess, regardless of vehicle type (two-wheeler, three-wheeler, car, bus). This rate was introduced by the GST Council in its 36th meeting (July 2019) via Notification No. 1/2019-CT(R) dated July 25, 2019, and continues unchanged under the GST 2.0 rate restructuring effective September 22, 2025.
India's push toward electric mobility carries a clear tax incentive: a flat 5% GST on electric vehicles versus the 28% GST plus compensation cess that applies to their petrol and diesel counterparts. For a buyer choosing between a Rs 15 lakh electric car and its ICE equivalent, the GST difference alone saves Rs 3.45 lakh or more. This guide covers every GST angle of the EV ecosystem, from vehicles and batteries to chargers, spare parts, and used EV sales.
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GST Rates: EV vs ICE Vehicles Compared
The single biggest tax advantage of buying an electric vehicle in India is the GST rate differential. Here is a side-by-side comparison:
Tax Rate Chart
GST Rate Comparison: Electric vs ICE Vehicles
Effective September 22, 2025 (GST 2.0)
Electric Vehicle (All Types)
Zero compensation cess
Petrol/Diesel Car (up to 1200cc, 4m)
29% effective rate
Petrol/Diesel Car (1200-1500cc)
31% effective rate
Diesel Car (1500cc+)
31% effective rate
SUV (4m+, 1500cc+, 170mm GC)
50% effective rate
Hybrid Vehicle
Same as ICE equivalent
EV Charger Equipment
HSN 8504
EV Charging Service
SAC 998714
Source: Notification No. 1/2019-CT(R); GST 2.0 rate revision effective September 22, 2025
What the 5% Rate Covers
The 5% concessional rate applies to all electrically operated vehicles where the traction motor draws energy from:
- An onboard battery (BEV, battery electric vehicle)
- A fuel cell (FCEV, fuel cell electric vehicle)
- An onboard electric generator (range-extended EVs)
Hybrid vehicles (mild hybrid, strong hybrid, plug-in hybrid) that have both an internal combustion engine and an electric motor are not eligible for the 5% rate. They attract the same GST and cess as their pure ICE counterparts. The GST Council has explicitly excluded hybrid vehicles from the concessional EV category.
HSN Codes for Electric Vehicles
The correct HSN classification determines the applicable GST rate. Misclassification can trigger demand notices and interest.
| Vehicle Type | HSN Code | GST Rate | Compensation Cess |
|---|---|---|---|
| Electric car/four-wheeler | 8703 40 | 5% | Nil |
| Electric two-wheeler (scooter/motorcycle) | 8711 60 | 5% | Nil |
| Electric three-wheeler (auto/cargo) | 8703 40 | 5% | Nil |
| Electric bus | 8702 40 | 5% | Nil |
| Electric goods carrier | 8704 40 | 5% | Nil |
| EV charger/charging station (equipment) | 8504 | 5% | Nil |
| Lithium-ion battery (sold with EV) | Part of vehicle | 5% | Nil |
| Lithium-ion battery (sold separately) | 8507 60 | 18% | Nil |
| EV spare parts and accessories | 8708 / 8714 | 28% | Nil |
Battery Classification: The 5% vs 18% Split
The GST treatment of EV batteries depends on how the battery is supplied:
Battery sold as part of the vehicle (fitted at sale): The battery is treated as a component of the vehicle. The entire vehicle price, including the battery, attracts 5% GST. No separate classification is needed.
Battery sold separately (replacement, standalone, or battery-as-a-service): A lithium-ion battery sold independently falls under HSN 8507 60 and attracts 18% GST. This applies to:
- Replacement batteries purchased after the original battery degrades
- Battery swapping station inventory
- Battery-as-a-service (BaaS) providers who sell or lease batteries independently
This creates a pricing gap. A Tata Nexon EV battery as part of the vehicle costs 5% GST; the same battery purchased as a replacement from a service center attracts 18% GST. Industry bodies have repeatedly requested the GST Council to bring standalone EV batteries to 5%, but as of August 2026, the 18% rate stands.
EV Charging: Equipment vs Service
Charging Equipment (5% GST)
Physical EV charging stations, wall-box chargers, and portable chargers fall under HSN 8504 and attract 5% GST. This covers:
- AC slow chargers (3.3 kW to 22 kW)
- DC fast chargers (50 kW to 150 kW+)
- Home wall-box chargers
- Portable/mobile chargers
Charging Service (18% GST)
The act of charging an electric vehicle (supplying electricity through a charging station) is classified as a service under SAC 998714 (maintenance and repair services for transport equipment) and attracts 18% GST.
This is an important distinction for businesses operating EV charging stations. The charger hardware purchase attracts 5% GST with ITC available, but the charging revenue is taxed at 18%.
Battery Swapping Services
Battery swapping (removing a depleted battery and replacing it with a fully charged one) is classified as a service and attracts 18% GST. The NITI Aayog's Battery Swapping Policy framework treats this as a supply of service, not a sale of goods.
ITC on Electric Vehicle Purchases
General Rule: ITC Blocked
Section 17(5)(a) of the CGST Act blocks ITC on motor vehicles and other conveyances, except in specific cases. This means most businesses cannot claim ITC on the purchase of electric vehicles used for employee transport, director use, or general business purposes.
Exceptions Where ITC Is Available
ITC on EV purchases is available if the vehicle is used for:
| Purpose | ITC Available? | Condition |
|---|---|---|
| Transportation of passengers (cab/fleet operator) | Yes | Business must be in the business of transporting passengers |
| Driving school/training | Yes | Vehicle must be used for imparting training on driving |
| Vehicle dealership (further supply) | Yes | Vehicle purchased for resale |
| Motor vehicle rental service | Yes | Renting/leasing the vehicle to customers |
| Employee transport (if obligatory) | No | ITC blocked even if employer is legally required to provide transport |
| Director/management use | No | ITC blocked |
ITC on EV Charging Infrastructure
Businesses that install EV charging stations on their premises can claim ITC on:
- Charging equipment (5% GST paid)
- Installation and civil work (18% GST paid)
- Electricity meter and wiring (applicable GST paid)
This ITC is available only if the charging infrastructure is used for business purposes (fleet charging, employee EV charging as part of employment terms, or commercial charging station operation).
PM E-DRIVE: Central Government Incentive Scheme
PM E-DRIVE (Electric Drive Revolution in Innovative Vehicle Enhancement) replaced the FAME-II scheme from October 1, 2024. The scheme has a total outlay of Rs 10,900 crore and runs until March 31, 2028.
Demand Incentive Structure
| Vehicle Category | Incentive | Cap | Deadline |
|---|---|---|---|
| Electric two-wheelers | Rs 5,000/kWh | 15% of ex-showroom price | July 31, 2026 |
| Electric three-wheelers | Rs 10,000/kWh | 15% of ex-showroom price | March 31, 2028 |
| Electric buses | Demand-linked | Per state allocation | March 31, 2028 |
| EV charging infrastructure | Capital subsidy | Per station | March 31, 2028 |
For two-wheeler buyers: The subsidy deadline of July 31, 2026 means demand incentives for electric scooters and motorcycles under PM E-DRIVE have ended for new purchases from August 2026. State-level subsidies (if active) remain available independently.
How GST Applies on Subsidized Vehicles
When the government subsidy is paid directly to the manufacturer/dealer (reducing the ex-showroom price), GST is levied on the post-subsidy price that the buyer actually pays. The subsidy amount is not treated as consideration for supply.
Example: An electric scooter with an ex-showroom price of Rs 1,20,000 receives a Rs 18,000 PM E-DRIVE subsidy. The buyer pays Rs 1,02,000. GST at 5% applies on Rs 1,02,000 = Rs 5,100. Total cost to buyer: Rs 1,07,100 (excluding road tax and insurance).
State-Level EV Incentives
Multiple states offer additional incentives beyond the central PM E-DRIVE scheme:
| State | Key EV Incentives |
|---|---|
| Delhi | 100% road tax waiver, 100% registration fee waiver, up to Rs 30,000 subsidy on two-wheelers, up to Rs 1,50,000 on cars, Rs 6,000 home charger subsidy |
| Maharashtra | Rs 5,000/kWh subsidy (all EV categories), up to Rs 1,50,000 for e-cars, 100% road tax waiver, toll exemptions on major expressways |
| Gujarat | Rs 20,000 for e-two-wheelers, Rs 1,50,000 for e-cars, 25% capital subsidy on charging stations, 100% electricity duty exemption, road tax at 1% |
| Tamil Nadu | 100% road tax waiver, up to 50% land cost subsidy for EV manufacturing in southern districts |
| Karnataka | 100% road tax and registration fee exemption for first 2 lakh EVs, capital subsidy for EV manufacturers |
| Rajasthan | 100% SGST reimbursement on EV purchase, road tax exemption |
| Telangana | 100% road tax exemption, Rs 5,000/kWh subsidy for two-wheelers |
Note: State EV policies have specific validity periods and budget caps. Verify the current status of your state's EV policy before making a purchase decision. State subsidies are in addition to (not instead of) the central PM E-DRIVE incentive.
GST on Used/Second-Hand Electric Vehicles
Used electric vehicles sold by registered dealers attract GST on the margin (selling price minus purchase price), not on the full selling price.
| Scenario | GST Treatment |
|---|---|
| Registered dealer sells used EV | 18% GST on margin (SP minus PP) |
| Margin is negative (sold at loss) | No GST payable |
| Private individual sells used EV | No GST (not a taxable supply) |
| Company sells its used EV (capital asset) | 18% GST on transaction value |
Example: A used car dealer purchases a pre-owned electric car for Rs 8,00,000 and sells it for Rs 9,50,000. GST at 18% applies on the margin of Rs 1,50,000 = Rs 27,000.
Compliance Checklist for EV Businesses
If you are an EV dealer, charging station operator, fleet operator, or battery swap provider:
- HSN/SAC classification: Use the correct HSN codes listed above. Misclassification triggers Section 73/74 demand proceedings.
- Invoicing: Separate vehicle sales (5% GST, HSN 8703 40) from accessories (28% GST, HSN 8708). Do not club them under a single HSN.
- ITC claims: Claim ITC only if your business falls within the exceptions under Section 17(5)(a). Document the business purpose.
- Battery invoicing: If selling batteries separately, invoice under HSN 8507 60 at 18%. If selling as part of the vehicle, no separate line item is needed.
- Charging service billing: Issue tax invoices for charging services under SAC 998714 at 18% GST. Do not classify charging revenue as electricity supply (which would be exempt).
- Subsidy documentation: Maintain records of government subsidies received, the pre-subsidy and post-subsidy prices, and the GST computed on the post-subsidy amount.
Key Notifications and Legal References
| Reference | Description |
|---|---|
| Notification No. 1/2019-CT(R) dated July 25, 2019 | Reduced GST on EVs from 12% to 5%; reduced GST on EV chargers from 18% to 5% |
| 36th GST Council Meeting (July 27, 2019) | Recommended the 5% rate for EVs and chargers |
| Entry 242A, Schedule I of Notification 1/2017-CT(R) | Lists electrically operated vehicles at 5% |
| Section 17(5)(a), CGST Act 2017 | ITC restriction on motor vehicles |
| PM E-DRIVE Scheme (October 1, 2024) | Central demand incentive replacing FAME-II |
| GST 2.0 rate revision (September 22, 2025) | Restructured rate slabs; EV rate unchanged at 5% |
This guide is based on the CGST Act 2017 (as amended), GST Council notifications, the PM E-DRIVE scheme guidelines, and state EV policy documents current as of August 2026. GST rates and government incentive schemes are subject to revision by the GST Council and respective state governments. Consult a Chartered Accountant for advice specific to your EV business or purchase.
