Electric vehicle manufacturers, including Tata Motors, Mahindra & Mahindra, JSW MG Motor, BYD, Mercedes-Benz, BMW and the newly arrived Tesla, could be
facing a big setback in sales soon, as per a Reuters report. This is because the GST Council will soon decide on a proposal to raise the current tax rate on luxury EVs. The GST rationalisation group of ministers (GoM) recently proposed higher taxes on EVs priced above Rs 20 lakh, from the current 5 percent to 18 percent. Although the GST Council's final decision would only be announced post the September 3 and 4 meeting, the news has triggered opposition from EV makers in the country. Also Read: Maruti Suzuki Escudo (Victoris) India Launch Live Updates If given the go-ahead, the hike in EV tax would affect both high-end and accessible EV models. Tata Motors reportedly told Reuters that it was 'imperative' that the lower 5 percent tax rate be retained to continue the uptake of electric vehicles in India. Domestic OEMs such as Tata Motors and Mahindra will both be affected by the hike, as they currently have multiple EV models priced above the Rs 20 lakh bracket. Between April and July 2025, EV sales have increased by 93 percent, to 15,500 units. However, if the higher 18 percent tax rate is applied, then both domestic and high-end brand EVs will see a drop in demand. As per Reuters, BMW India is concerned that the move would 'derail the vision of high electric adoption and local production'. Meanwhile, Santosh Iyer, CEO, Mercedes-Benz India, said that the revised tax rate would 'mostly impact the entry-level' luxury cars. 'Our top-end luxury battery EVs will not be impacted much'. As per the report. Based on July 2025 data, Tata Motors is leading the country's EV market with a 40 percent share, followed by Mahindra at 18 percent. Chinese EV maker BYD holds 3 percent market share and European brands like BMW and Mercedes-Benz make up for 2 percent market share. The revised tax would also affect the newly launched Tesla EV brand in the country, which is already seeing a slow uptake with the initial bookings for the Model Y electric SUV. Being fully imported, these cars are already attracting close to 100 percent tariffs, and the added 18 percent GST liability would further put their value proposition in question. On September 3, the GST Council's two-day meeting to decide on its next-generation reforms and tax changes began and the final verdict on the EV tax hike is expected soon. (Source: Reuters) Keep reading Times Now Auto for more instant updates on car tax reforms.