The team at SRKA & COMPANY works with clients across the automotive industry and Robotic Engineering Industries— from manufacturers to Technology Suppliers, to help propel profitable growth, reduce litigation, improve processes  reduce revenue leakages and keep abreast of the rapid changes in the industry and regulatory environment.  We focus on the needs and preferences of the customer and ensure that all assignments generate value for our clients.

We serve:

  • Four Wheelers
  • Commercial vehicles
  • Automobile ancillaries
  • Healthcare Robotics
  • Industrial Robotics
  • Defence

Some of the Fiscal Incentives for Automotive Sector

Various fiscal incentives are provided by the Government of India for promoting investment in the Automotive sector. Some of the key incentives are outlined below:

Income Tax:-

Section 80EEB

a) Eligibility criteria

The deduction under this section is available only to individuals. This deduction is not available to any other taxpayer. Thus, if you are a HUF, AOP, Partnership firm, a company, or any other kind of taxpayer, you cannot claim any benefit under this section.

b) Amount of deduction

A deduction for interest payments up to Rs 1,50,000 is available under Section 80EEB. An individual taxpayer may have an electric vehicle for personal use or for business use. This deduction would facilitate individuals having an electric vehicle for personal use to claim the interest paid on the vehicle loan.

In case of business use, an individual can also claim the deduction up to Rs 1,50,000 under section 80EEB. Any interest payments above Rs 1,50,000 can be claimed as a business expense. To claim as a business expense, it is necessary that the vehicle should be registered in the name of the owner or the business enterprise.

Do note that an individual taxpayer should obtain the interest paid certificate and keep the necessary documents such as tax invoice and loan documents handy at the time of filing of the return.

2. Conditions for claiming the deduction

  The loan must be taken from a financial institution or a non-banking financial company for buying an electric vehicle.

  The loan must be sanctioned anytime during the period starting from 1 April 2019 till 31 March 2023.

  “Electric vehicle” has been defined to mean a vehicle which is powered exclusively by an electric motor whose traction energy is supplied exclusively by traction battery installed in the vehicle and has such electric regenerative braking system, which during braking provides for the conversion of vehicle kinetic energy into electrical energy.

Promotion of electric vehicle mobility solution

The union cabinet has approved Phase-II of FAME scheme for promotion of electric mobility in the country. The FAME (Faster Adoption and Manufacturing of Electric Vehicles) is an incentive scheme of the government of India for the promotion of electric and hybrid vehicles in the country. The ultimate objective of the scheme is to promote electric mobility and the scheme offers financial incentives for the purchase of electric vehicles and the creation of electric transportation and charging infrastructure. Under the scheme, the incentives are available for 3 Wheelers, 4 Wheelers and electric 2 wheelers.

The Phase-II of the scheme has started from 1 April 2019 and will be completed by 31 March 2022. The Phase-II is an expanded version of the first phase. FAME India Phase II has a total outlay of Rs 10000 Crores over a period of 3 years from 1 April 2019 to 31 March 2022.

GST on Automobile Sector:-

The two taxes charged to the end consumer on car and bikes previously were excise and VAT, with an average combined rate of 26.50 to 44% which is higher than the GST rates of 18 and 28%. Therefore, there will be less burden of tax on the end consumer under GST.

Importers/dealers can cheer as they would be able to claim the GST paid on goods imported/sold whereas previously, they were ineligible to claim the excise duty and VAT paid. Excise paid on stock transfer would be covered by IGST under the GST law. Advance received for supply of goods will also be taxed under GST. GST would help the manufacturers in procuring auto parts at a cheaper cost due to an improved supply chain mechanism under GST.

GST on car and bikes are kept under the 28% bracket and a list of cess to be levied on a different kind of automobile has also been declared by the Indian government. Cess has been levied on different kind of automobiles ranging from 1 to 15%. We have created an infographic for an understanding of different cess rates applied on different kind of automobiles.

GST rate related changes on supply of goods and services

  1. The GST rate on all electric vehicles be reduced from 12% to 5%.
  2. The GST rate on charger or charging stations for Electric vehicles be reduced from 18% to 5%.
  3. Hiring of electric buses (of carrying capacity of more than 12 passengers) by local authorities be exempted from GST.