Mercedes-Benz India has cautiously responded to proposals for an upward revision in Goods and Services Tax (GST) rates on electric vehicles (EVs), describing the timing of the potential tax change as “a bit early than desired.” While the company expressed concerns about the possible impact of higher GST on the wider EV market, it clarified that its top-end luxury EV portfolio is expected to face limited disruption. The comments come amid ongoing government deliberations over GST rates, which could notably affect consumer behavior and industry investment strategies.
Key Highlights From Mercedes-Benz India On GST Revisions And EV Market Impact
Mercedes-Benz India emphasized the current low 5% GST rate on most passenger EVs as a crucial factor encouraging market adoption and fostering an environment conducive to investment.
Any sharp increase in GST rates on EVs priced below INR 40 lakh (~$50,000) may significantly slow down demand from entry-level luxury EV buyers.
The luxury EV segment priced above INR 40 lakh, where Mercedes-Benz’s top-end models fall, is expected to be less vulnerable due to consumer profile and pricing dynamics.
Santosh Iyer, Managing Director and CEO of Mercedes-Benz India, highlighted that despite the high import duties (roughly 110%) on fully built vehicles, incremental GST hikes could reduce overall demand, potentially impacting government revenues.
The company advocates for clear, stable tax policies to enable better long-term planning, investment confidence, and smooth growth in India’s EV ecosystem.
Market And Policy Context Surrounding GST On EVs
A government tax panel recently recommended raising GST rates from the current 5% to 18% on EVs priced between INR 20 lakh and INR 40 lakh, and to 28% or possibly 40% on luxury EVs priced above this range.
These proposals reflect attempts to standardize tax structures but face pushback from automakers warning of adverse effects on EV adoption momentum.
GST revisions have triggered industry-wide concerns, with companies like Tesla, BMW, and Mercedes-Benz urging policy clarity to avoid market disruption.
The GST Council, composed of finance ministers from states and the federal government, is slated to decide on these proposals imminently, under scrutiny from stakeholders and investors.
Operational Implications For Mercedes-Benz India
The company remains committed to expanding its EV lineup and capabilities in India, having achieved notable milestones such as crossing 5,000 electric vehicle deliveries.
Investments in charging infrastructure, customer experience programs, and localization efforts are part of Mercedes-Benz India’s strategy to strengthen EV leadership.
Stable tax incentives are deemed essential to sustain investment in local assembly, manufacturing partnerships, and research & development.
Demand shifts due to tax policy could influence production planning, dealership inventory management, and marketing strategies targeting diverse consumer segments.
Industry Perspectives And Consumer Impact
Elevated GST rates risk increasing the effective on-road price of EVs, potentially pushing prospective buyers toward internal combustion engine counterparts.
Price-sensitive segments are particularly vulnerable, with affordability a key barrier to wider EV penetration in India’s emerging market.
Policy uncertainty creates hesitation among consumers and investors alike, breaking the trust needed for a sustainable transition to green mobility.
Automakers emphasize holistic policy design balancing taxation, subsidies, infrastructure, and awareness to achieve national EV adoption targets.
Looking Ahead: Calls For Clarity And Consistency
Mercedes-Benz India urges quick resolution and clear communication from policymakers on GST rates and related incentives.
A stable, predictable tax regime over an extended horizon is urged to enable strategic investments and support multi-year business planning.
The company aligns with industry efforts urging government engagement with stakeholders to craft balanced, growth-oriented EV policies.
Continued collaboration with governmental bodies, industry associations, and ecosystem partners is expected to secure India’s EV future.
In summary, Mercedes-Benz India’s cautious but hopeful stance on GST revisions underscores the delicate balance between fiscal policy and industry growth imperatives. While the luxury EV segment may be less impacted, the broader EV market’s trajectory hinges on preserving supportive tax frameworks. The company remains steadfast in its commitment to India’s clean mobility transition, emphasizing that policy clarity and consistency underpin successful EV adoption and manufacturing localization.
Sources: Reuters (TradingView), Economic Times Auto, Moneycontrol, The Times of India, NDTV Profit, Business Standard
