New Electric Car Scheme Offers Import Tax Cuts To Makers For Local Production

The government will significantly lower import tax for foreign automakers that pledge to invest in domestic electric vehicle (EV) production, as it looks to strengthen local manufacturing and draw in global industry leaders.

Automakers will be permitted to import up to 8,000 electric vehicles at a reduced duty rate of 15 per cent, compared to the current 70–100 per cent, provided they commit to investing Rs 4,150 crore in local EV manufacturing, according to the new EV policy notified by the government.

They will be required to begin operations at their manufacturing facilities in India within three years of receiving approval and must meet specified local content requirements, according to the notified guidelines under the Scheme to Promote Manufacturing of Electric Passenger Cars in India.

The government on Monday notified guidelines to give effect to the Scheme, paving the way for electric car makers to apply once the application window opens. Officials said the application window may open in a couple of weeks for at least 120 days.

The Scheme was notified on March 15 last year by the Heavy Industries Ministry.

"To encourage the global manufacturers to invest under the Scheme, the approved applicants will be allowed to import Completely Built-in Units (CBUs) of e-4W with a minimum CIF value of USD 35,000 at reduced customs duty of 15 per cent for a period of 5 years from the Application Approval Date. Approved applicants would be required to make a minimum investment of Rs 4,150 crore in line with the provisions of the scheme," an official statement said.

The maximum duty foregone per applicant has been capped at Rs 6,484 crore on the investment made under the Scheme.

The minimum investment commitment in India to be made by an applicant during a 3-year window of Rs 4,150 crore (about USD 500 mn), the Heavy Industries Ministry said.

The applicant is required to set up a manufacturing facility and commence operations for the manufacturing of eligible products -- e-4W within a period of 3 years from the application approval date.

Expenditure incurred on new plant, machinery, equipment and associated utilities, engineering research and development (ER&D) would be eligible for availing investment-linked benefits under the scheme.

However, expenditure on land will not be considered, although new buildings of the main plant and utilities will be considered as part of the investment, provided it does not exceed 10 per cent of the committed investment.

A minimum domestic value addition (DVA) of 25 per cent has to be achieved within 3 years and a minimum DVA of 50 per cent must be achieved within 5 years from the date of issuance of the approval letter for applicants under the scheme.

The expenditure incurred on charging infrastructure would be considered up to 5 per cent of the committed investment.

The applicant's commitment to set up manufacturing facilities, achievement of DVA and compliance with conditions stipulated under the scheme shall be backed by a bank guarantee from a scheduled commercial bank in India, equivalent to the total duty to be foregone, or Rs 4,150 crore, whichever is higher.

The window for receiving applications through the notice inviting applications will be for a period of 120 days (or more). Further, the Ministry of Heavy Industries shall have the right to open the application window, as and when required till March 15, 2026.

A non-refundable application fee of Rs 5,00,000 will be payable by the applicant while filing the application form.

To qualify and receive benefits under the scheme, an applicant is required to have a global group revenue from automotive manufacturing of a minimum Rs 10,000 crore.

Moreover, the global investment of a company or its group companies in fixed assets must be at least Rs 3,000 crore, based on the latest audited annual financial statements at the time of filing the application. 

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