HSBC has cautioned that potential reductions in Goods and Services Tax (GST) on internal combustion engine (ICE) vehicles could adversely affect the growth momentum of India’s electric vehicle (EV) sector.
According to the financial services major, lowering GST rates for conventional vehicles may make them more attractive in terms of upfront cost, which could slow the adoption of EVs that are still relatively expensive despite government incentives.
Currently, EVs attract a 5% GST rate, compared to 28% for ICE vehicles. Any reduction in the latter category could narrow the price gap, discouraging customers from transitioning to electric mobility. HSBC emphasised that such a move could undermine India’s broader goals of achieving carbon neutrality and boosting clean transportation.
The warning comes as the Indian government continues to weigh strategies to balance consumer affordability, industry competitiveness, and climate commitments. While the auto industry has welcomed discussions on possible tax revisions, EV advocates argue that stronger policy support is critical to accelerate adoption.
HSBC further noted that India’s EV ecosystem — including battery manufacturing, charging infrastructure, and supply chains — is still at a nascent stage and needs continued policy protection to scale sustainably.