According to a government document, a tax panel has proposed substantial increases in GST on luxury electric cars costing more than $46,000 (about ₹40 lakh). This might be a blow to US companies like Tesla Inc. and Chinese company BYD. In order to make suggestions to the GST Council regarding the impending rationalisation, the group of ministers has proposed raising the GST to 18% for electric automobiles that cost between ₹20 lakh and ₹40 lakh and 28% for those that cost more.

The justification is that these cars are mostly imported rather than produced domestically and serve the “upper segment” of society.In the largest tax reform since 2017, the GST Council, led by Union Finance Minister Nirmala Sitharaman, will convene on September 3–4 to deliberate whether to rationalise the indirect tax on up to 175 items and services.In order to boost an economy that has been negatively impacted by 50% US tariffs, Prime Minister Narendra Modi promised extensive GST reforms in his Independence Day speech on August 15.

According to multiple media outlets that cited sources with knowledge of the situation, the government has really chosen to eliminate the 28% tax rate completely, giving the GST Council the choice to raise the GST on EVs to 18% or place them in a new 40% tax category. Following the announcement of this news, the Nifty Auto index went south and dropped as much as 0.5%, while local automakers Tata Motors Ltd and Mahindra & Mahindra Ltd saw declines of 1.2% and nearly 3%, respectively.