The electric vehicle (EV) industry is projected to become a $150 billion industry by 2030, making it a promising sector. However, there is a pressing issue regarding the applicability of Goods and Services Tax (GST) on a crucial component of the EV ecosystem—the charging infrastructure. To analyze the GST impact, it is important to understand the nature of the supply involved.
An EV charging station serves as an infrastructure where users can access charging modules/devices, connect their vehicles to the charging system, consume electricity to charge their vehicles, and pay the charging station for these services. It is crucial to determine whether these activities qualify as a supply of goods or services under GST.
Electricity is considered goods based on established positions in various Supreme Court judgments. If EV charging stations are categorized as supplying electricity, they would be exempt from GST under the generic exemption for electricity supply. However, this exemption would prevent charging stations from claiming input GST credit for expenses incurred in setting up and maintaining the infrastructure, which may not be ideal for players in this field.
Alternatively, if the activities of an EV charging station are classified as a supply of services, they would be subject to a GST rate of 18%. In this case, the charging stations could claim input GST credit against output GST, but the ultimate cost for users/consumers may increase.
Considering these factors, the following developments should be considered:
- Clarification from the Ministry of Power: In 2018, the Ministry of Power issued a notification clarifying that EV charging stations do not engage in the sale of electricity. Although this clarification was specific to the requirement of obtaining a license under electricity regulatory laws, its applicability to GST laws cannot be disregarded.
- European Union (EU) judgment: While no specific judgments have been found in India, a recent EU judgment (P. in. W. (C-282/22)) determined that the transaction of supplying electricity through charging stations is a supply of goods. The EU VAT laws share similarities with GST laws in India, making this judgment worth considering.
Clearly, there are compelling arguments on both sides of this debate. However, the lack of clarity may lead to interpretation issues, investigations, and litigation, which could hinder the growth of the EV sector. To ensure certainty in taxation and support the sector’s growth, it is essential for the government/GST Council to provide clear guidelines on the GST position as soon as possible. Additionally, amnesty or regularization should be considered for EV charging infrastructure players who may have adopted varying tax positions thus far.