Government Proposes Customs Duty Hike on EV Parts to Incentivize Domestic Manufacturing

The government has proposed the doubling of customs duty on bus and trucks via CBU route


The Indian government recently notified the implementation of ‘Faster Adoption and Manufacturing of Electric Vehicles in India Phase II (FAME India Phase II)’ with a total budget outlay of ₹100 billion ($1.41 billion). The program is aimed at promoting the electric mobility in the country and expected to be deployed over a period of three years with effect from April 1, 2019.

However, the government recognizes that the success of its ‘National E-Mobility Program’, launched in March 2018  with a vision of achieving 100 percent e-mobility by 2030, cannot be achieved without a robust e-mobility ecosystem, including the domestic vehicle manufacturers, charging infrastructure companies, fleet operators, and service providers.

Therefore, recently the Union Cabinet, chaired by Prime Minister Narendra Modi, approved the proposal for setting up a national mission on transformative mobility and battery storage initiatives along with the creation of Phased Manufacturing Program (PMP) to promote domestic manufacturing of electric vehicles and related parts.

“To promote domestic manufacturing of electric vehicles, a phased manufacturing roadmap has been prepared keeping in view the present status of manufacturing ecosystem in the country, wherein graded duty structure, indigenous manufacturing of electric vehicle, its assemblies/sub-assemblies, and parts/subparts/inputs of the subassemblies will be promoted over a period of time,” said the notification.

As per the phased manufacturing proposal, the government has imposed 15 percent customs duty on parts that are used to manufacture electric vehicles such as AC or DC charger and motor, energy monitor, brake system for recovering, electric compressor, power control unit, and others. The revised duty under PMP has been proposed from April 2021. Currently, there is no duty on these parts.

The government has also proposed the doubling of customs duty on bus and trucks via CBU (completely built-up) route to 50 percent from the current 25 percent. The revised duty under PMP has been proposed from April 2020.

Similarly, customs duty on two-wheelers, bus, and trucks under SKD (semi knocked down) route have been proposed from 15 to 25 percent, and for passenger vehicles and three-wheelers, it will increase from 15 percent to 30 percent after April 2020.

The customs duty under CKD (completely knocked down) route on the bus, passenger vehicle, two-wheelers, three-wheelers, and trucks will increase from 10 percent to 15 percent after April 2020.

The government has also proposed to double the customs duty on lithium-ion cells for use in the manufacture of the lithium-ion accumulator for electric vehicles from 5 percent to 10 percent and triple the customs duty on battery packs for use in the manufacture of electric vehicles from 5 percent to 15 percent. The proposed duty will be applicable from April 2021.

Recently, the government had lowered the customs duty on import of EV components to 10-15 percent. The government had also slashed the applicable rate of the Goods and Services Tax (GST) on lithium-ion batteries.

Previously, Mercom reported that EV sales so far have been inconsistent under the FAME program. While some states have made good progress, others are well-behind in EV adoption.

“We need foreign investments and technologies to foster competition and create a robust and innovative EV ecosystem in the country. Imposing duties before a new Industry sector is born does not send the right message to the investment community,” said Raj Prabhu, CEO of Mercom Capital Group.

Nitin is a staff reporter at and writes on renewable energy and related sectors. Prior to Mercom, Nitin has worked for CNN IBN, India News, Agricultural Spectrum and Bureaucracy Today. He received his bachelor’s degree in Journalism & Communication from Manipal Institute of Communication at Manipal University and Master’s degree in International Relations from Jindal School of International Affairs. More articles from Nitin Kabeer