India to cut import tax on EVs? Nirmala Sitharaman issues clarification, says ’no proposal is...’

Union Finance Minister Nirmala Sitharaman on Friday denied the reports claiming that the government is mulling over slashing import tax on electric vehicles for automobile manufacturers if they tie up with a local manufacturing unit. The clarification came as earlier news agency Reuters reported that the central government is considering lowering the import duty to as low as 15% from the current levels of 100% for cars that cost above ₹33 Lakhs and 70% for the rest.

"No proposal is before me to lower import duty on electric vehicles," Union Finance Minister Nirmala Sitharaman said while speaking to reporters on the sidelines of the B20 summit.

The Reuters report mentioned that the reduction in import duty might have helped companies like Tesla who aspire to enter Indian markets and have recently made a proposal to establish a car factory in India. "There is an understanding with Tesla's proposal and the government is showing interest," the Reuters report cited the official familiar with the development.

Tesla's concerns around Indian market 

Tesla founder Elon Musk has expressed concerns over the high tariff rates in India and the company started to engage in discussions concerning the potential introduction of Tesla into the domestic automobile market after much deliberation. In 2021, Tesla endeavored to establish a presence in India by advocating for a reduction in the prevailing 100% import tax imposed on electric vehicles (EVs).

However, the prospective agreement between Elon Musk and India did not materialize as the Indian authorities emphasized the requirement for a firm commitment to local manufacturing as a condition for the arrangement.

The clarification by Nirmala Sitharaman dashed the hopes of many manufacturers which went up after the Reuters report. It is not clear at the moment if the decision to stay with the earlier import tax rate will impact Tesla's plan to set up the car factory.