The Indian government is actively promoting the adoption of electric vehicles (EVs) as part of its sustainable transportation initiatives. This includes setting up public charging stations and promoting home charging solutions. While efforts are being made expand the EV charging infrastructure, the taxability aspects of charging services remains unclear. It appears that the thought process is still lacking which might have huge repercussions in terms of GST demands and making the EV charging costlier which might not be the intention of the government.
The first step is to understand the nature of the ‘supply’ provided by these stations. An EV charging station serves as essential infrastructure where users can access charging modules and connect their vehicles operating systems for charging. Users pay for the electricity consumed during the charging process. The billing is done per unit basis. Now, the key question is whether the activities and facilities offered by an EV charging station qualify as a supply of ‘goods’ or supply of ‘services’ under GST.
- GST Applicability Of EV Charging Stations-
The Ministry of Power provided a clarification regarding the requirement of licensing by the charging stations as per the Electricity Act 2003, wherein the ministry clarified that the charging of an EV battery via a charging station requires the consumption of electricity by the charging station. However, the activity does not involve the sale of electricity.
The clarification categorically explains that the activity by the charging station would be qualified as a service of charging the battery. Hence, the stations do not require a license under the Electricity Act. If someone opt for charging of EV by PCS, the activity shall attract a GST, but if the supply of the electrical energy is treated as sale of electricity , it shall be exempted from GST.
In 2018, the Power Ministry vide Letter no. 23/08-R&R dated 13.04.2018, has clarified that charging of EVs should be treated as service. In fact, that was in a different context because where the electricity is sold as goods, the regulatory requirements of Electricity laws and compliances specified by Ministry of Power will have to be complied with which are quite cumbersome. Power Ministry termed it as ‘service’ in order to promote EV charging stations so that they don’t have to follow the cumbersome process of obtaining the licenses and other compliances. Declaring it as a ‘service’ was a much easier task for the Ministry of Power without paying attention to the fact that it might have some other grave consequences under other laws.
With all this in place, the conclusion is that activity of charging the batteries of EVs are being categorized as services by the Ministry of Power which is the regulating authority. Simultaneously, one cannot disown the fact that time and again, Supreme Court has held that ‘electricity’ is goods. Thus, it would be quite difficult to conclude whether the EV charging stations are aproviding services or selling electricity. How are they different from the diesel and petrol selling stations? There might be a fine blurring line of distinction or may be none.
- GST Rate for EVs-
There has been a reduction in the GST rate of EVs from 12 to 5 % and from 18% to 5 % in the case of chargers and charging stations which the objective of boosting the electric vehicle market.
The Apex Court held electricity as a movable item because the electricity reaches the consumer; its supply and consumption are recorded in meters which are installed by the electricity company resulting in the attraction of GST. Such attraction of GST makes the EV Companies eligible for tax credits depending upon the goods and services utilised for the purpose of business, and any other expenses/purchases don’t fall under the GST’s negative list. The taxpayers using the services of the EV charging stations are eligible to avail GST only if they use the electric vehicles for the purpose of business. If the charging of an EV is considered as the sale of electricity, the services rendered in respect of the same shall be exempted from GST, making the EV companies avail of any input tax credit. In the current situation, the infrastructure of EVs can be considered to be in the development stage, where people still charge their electronic vehicles either at home or at their office premises. The supply of electricity in the homes is exempted from GST, so the differences in taxation occur when the EVs are charged at home and office premises rather than at EV charging stations.
In conclusion, when the act of charging qualifies as the sale of electricity, it would be exempted from GST, whereas if it qualifies as a service, it shall attract GST. However, it is a relief that the rate of GST has been cut down from 18 % to 5%.