What is the HSN code for EV charging services?

15 Apr.,2024

 

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As the price of regular motor vehicles and fuels continues to increase, many people now prefer to use electric vehicles (EVs) as a long-term alternative and public transport. EVs are efficient and environment-friendly, not to mention cost-effective in the long run, as they require no fuel at all.

Many new and existing players named Ather Energy, Ola Electric, Hero Electric, Tata Motors etc., have entered this market. The Delhi government has recently asked e-commerce aggregators (for example, Zomato, Swiggy or Ola) to use EVs as their mode of transport.

Latest Updates

Budget 2023 Update
1st February 2023
1. Budget 2023 removed the Basic Customs Duty (BCD) on specific capital goods/machinery used for manufacturing Lithium-ion cells that are used in the battery of Electrically-operated Vehicles (EVs).
2. Also, Budget 2023 extended the BCD exemption on Lithium-ion cells used in manufacturing the battery or battery pack of cellular mobile phones and EVs or hybrid motor vehicles till 31st March 2024.

What are the services offered in the EV business?

EV companies typically provide a portable charger along with the vehicle, a performance upgrade (depending on the model), and servicing at regular intervals. 

Further, EV and other electric companies have installed charging stations where their vehicles can be quickly charged compared to normal chargers provided. Post the sale of vehicles, EV companies provide subscription plans to their application, including the health status of EVs, scheduled maintenance, and roadside and puncture assistance. 

GST rate and HSN code for EVs

The 36th GST Council meeting decided to reduce the GST rate on electric vehicles from 12% to 5% and chargers or charge stations from 18% to 5% to boost the electric vehicle market. The sale of electric vehicles is covered under HSN code 870240.

GST exemptions available for EVs

The hiring of electric buses (with a seating capacity of more than 12 passengers) to local authorities is exempted under GST. Hence, GST applies only to the sale of electric vehicles and any other services the EV company provides.

Availability of input tax credit to both the EVs charging station and those charging their EVs used for business purposes

Primarily, the business of EV charging stations is to recharge the batteries in electric vehicles. Charging of batteries involves the transfer of power from the charging station to batteries and potentially be considered as sale of electricity.

Clarifications issued by the Ministry of Power regarding issuing a license under the Electricity Act, 2003 stated that charging of EVs batteries can be considered a service and does not involve any sale of electricity.

The supreme court also noted that electricity is a movable item. As the electricity reaches the customer, the supply and consumption are recorded in meters installed by the electricity company. While there are no barriers to supply during the transfer of electricity.

Taking the above clarifications into consideration, charging EV batteries would attract GST. Accordingly, the input tax credit can be utilised by the EVs charging companies. Subject to goods and services being utilised for business purposes and any purchases/expenses do not fall under the negative list of GST.

The taxpayers who are using the services of EV charging stations can avail GST only when they are using the electric vehicle for their business purpose. Hence, no GST can be availed if the motor vehicle is used for personal purposes.

If charging EVs is considered a sale of electricity, the services provided will be exempted under GST. Accordingly, EVs charging companies can not utilise any input tax credit.

Currently, the infrastructure of EVs is in the development stage, and many people charge their EVs at home or office premises. The supply of electricity at our homes or offices is exempted under GST. Hence, the disparity in taxation grows when EVs are charged at home or offices compared to EV charging stations.

There is a gap in understanding, and multiple opinions could be formed on the above issue. It is highly recommended that the CBIC issues clarifications at the earliest on the taxability of EV charging stations and the availability of input tax credit.

What is the HSN code for EV charging services?

Tax-Free or Attract 18% GST Rate on EV Charging Stations

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