Home / Budget / Budget Expectations /  Budget may offer sops for shift to green mobility
Back

The Union budget may offer incentives, including faster tax depreciation, for electric vehicles and charging infrastructure to accelerate the transition to cleaner transport, two officials familiar with the development said.

The government aims to encourage the use of electric vehicles by businesses, focusing on supporting e-commerce and food delivery platforms to transition to green fleets. The government hopes encouraging the adoption of electric vehicles will reduce air pollution, lower dependence on costly imported oil, and address climate change.

The government is expected to offer tax incentives for investments in emission control, electric transportation, and charging infrastructure while promoting green initiatives through accelerated tax depreciation, one of the two officials said.

Depreciation allows businesses to deduct the cost of assets over time and save on taxes. Accelerated depreciation allows them to take these deductions more quickly, often in the first year of purchase, leading to lower tax bills.

You might also like 

Mamaearth’s plans put risky new-age IPOs in focus

With $1 billion, Apax leads in race for Quest Global stake

Why Europe’s largest asset manager is betting big on India

Ved Jain, a taxation expert and founder of accounting firm Ved Jain and Associates, said: “When one buys a capital item like machinery, plant, motor car, it is eligible for depreciation while computing your business income. You get this benefit over a period. So, the amount of depreciation that has been provided will be 15% on a car every year. When the government wants to encourage the demand for something, the depreciation rate is increased."

“In normal circumstances, one may end up getting full depreciation in 10 years, and in case of accelerated depreciation, you may end up getting it in five years," said Jain, a former president of the Institute of Chartered Accountants of India.

In addition to incentives for green mobility, the government may also announce measures to encourage investments in research and development of advanced battery technologies to reduce dependence on lithium-ion batteries, as India lacks a significant domestic source of lithium, the officials said.

The government aims to establish India as a hub of the electric vehicle supply chain by offering incentives for research and development in battery technologies, electric vehicles, and charging infrastructure.

Spokespeople for the ministries of finance and heavy industries did not respond to requests for comment at the time of publication.

“We need a comprehensive tax policy for electric vehicles, including income tax incentives, correction of inverted duties under customs and GST (goods and services tax) concessions (to be decided by the GST Council). It will be good if the budget outlines the policy and roadmap for this," said Pratik Jain, a partner at Price Waterhouse and Co. LLP.

The focus on boosting electric mobility comes amid India’s commitment to achieving net zero carbon emissions by 2070. In the past few years, the Centre has come up with several initiatives to accelerate the transition from ICE (internal combustion engine) vehicles to EVs, including the FAME scheme for electric two-wheelers and a production-linked incentive scheme for advanced chemistry cells. Further, an EV owner can avail of a tax deduction of up to 1.5 lakh on interest paid on loans for purchasing the vehicle under Section 80EEB of the Income Tax Act.

“While the government’s intention is clearly to incentivize this sector by announcing diverse schemes, there are sometimes ambiguities related to granting the incentives or inclusion of the product within the scheme. It is hoped that the balance of favour will tilt towards this upcoming sector which will contribute towards the zero carbon initiative and endeavour of the country," said Abhishek A. Rastogi, founder of law firm Rastogi Chambers. There should be a faster appellate mechanism to resolve disputes in case of ambiguities, Rastogi added.

In the FY23 budget, the finance minister announced plans for a battery-swapping policy, which is expected to be released soon. The government has targeted 30% electric vehicle adoption by 2030 and plans to take “transformational and radical measures" to achieve the goal, according to a report from NITI Aayog. In FY22, electric vehicle sales constituted 1.32% of vehicle sales. According to NITI Aayog, more than 759,000 electric vehicles were registered across the country, and about 1,800 charging stations were installed.

Elsewhere in Mint

In Opinion, Manu Joseph analyses the myths around the first martyr of the internet. Merryn Somerset Webb says it's a gamble to let woke ideas form your portfolio. Nitin Pai writes on the chances of an open decentralized internet. Long Story showcases 27 tech wonders from CES Las Vegas.

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Recommended For You
×
Get alerts on WhatsApp
Set Preferences My ReadsWatchlistFeedbackRedeem a Gift CardLogout