Increased taxes proposed for premium electric vehicles in India, according to a recent report on the tax advisory body's recommendations.

The Indian tax panel has proposed a significant increase in consumer taxes on luxury electric vehicles with a price tag exceeding $46,000, according to a government document outlining the panel's recommendations.

This tax hike comes amidst Indian Prime Minister Narendra Modi's push to reform the nation's tax structure and encourage the consumption of domestically produced goods. The proposed increase is part of a larger push to reform the nation's tax structure.

The GST Council, scheduled to convene this week, will discuss the proposals regarding electric vehicle taxes. For electric cars priced between Rs2m and Rs4m ($23,000-$46,000), the proposed GST rate should rise to 18% from the current 5%. For vehicles priced over $46,000, the panel has proposed a hike to 28%.

The information was shared by a government source with knowledge of the ongoing discussions. The proposed increase could affect the sales of international car manufacturers such as Mercedes-Benz, Tesla, BYD, and BMW operating in the Indian market.

BMW India, which is investing in expanding its EV range in India, warned that a tax increase could hinder the country's vision for widespread electric adoption and local production. Mercedes-Benz expressed concern that a higher tax rate would primarily affect entry-level luxury cars.

Tata Motors, currently holding a near 40% share in the Indian electric car market, emphasized the importance of retaining the current tax rate to sustain the momentum towards clean mobility. Domestic EV manufacturers like Tata Motors and Mahindra could be influenced by the tax proposal, although their range of vehicles above Rs2m is somewhat limited.

The Indian electric vehicle market has seen a significant growth spurt, with a 93% increase in EV sales to 15,500 units from April to July this year. However, high import tariffs and GST rates that can reach approximately 100% have been a barrier for foreign carmakers like Tesla, which has opened two showrooms in India but has yet to begin deliveries.

The proposed tax increase arrives at a time when India's trade relations with the US have been strained due to high tariffs. The automakers have collectively expressed concerns about the potential disruption to India's EV growth and objectives due to a tax increase.

The Modi administration has plans to eliminate the 28% tax bracket, which could lead the GST Council to retain the proposed 18% rate or classify luxury EVs under a new 40% tax category designated for certain luxury items.

Last month, Suzuki Motor announced plans to invest over Rs700bn ($8bn) in its Indian operations over the next five to six years. The government has advocated for substantial reductions in the goods and services tax (GST) across a range of products, potentially lowering costs for consumers. However, the tax panel has advised an increase in the GST rates for electric cars.

Automakers have urged the government to consider the potential impact of the tax increase on the growth of the electric vehicle market in India and the country's vision for widespread electric adoption and local production. The GST Council's decision regarding the tax proposals is eagerly awaited.

Increased taxes proposed for premium electric vehicles in India, according to a recent report on the tax advisory body's recommendations.