Mumbai, Oct. 14 -- The Goods and Services Tax (GST) Council has recommended an optional 5 per cent GST rate for passenger transport and rental services using electric vehicles (EVs). The proposal is subject to restrictions on input tax credit and seeks to clarify the tax treatment of electric mobility services where battery charging costs are included in the overall price.
The recommendation covers services provided using an EV with an operator. It applies to passenger transport, including eligible commercial operations, and to rental services in which an electric vehicle is supplied along with an operator. The proposed rate would cover the bundled transport or rental service when vehicle charging is included in the total amount charged.
Standalone electric vehicle charging services would remain outside the proposal and continue to attract 18 per cent GST. The distinction means the recommended rate would not apply to every activity connected with electric vehicles, but specifically to qualifying passenger transport and operator-assisted rental services.
The 5 per cent option would restrict input tax credit, which enables businesses to offset GST paid on eligible expenses. Operators choosing the lower rate would therefore be unable to claim back taxes paid on business costs, meaning the reduced rate may not necessarily lower their overall expenses. The recommendation may affect fleet operators, app-based mobility platforms, corporate transport providers and other businesses using EVs for passenger services.
The proposal was considered at the Council's 57th meeting as electric mobility adoption increases in India. EV retail sales rose 74 per cent year-on-year to a record 333,000 units in September 2026, according to the Federation of Automobile Dealers Associations. The recommendation now provides a proposed framework for taxation of selected EV-based services, while its practical impact will depend on implementation and the final conditions governing eligibility and credit restrictions.
Published by HT Digital Content Services with permission from Construction World.