HSN Code for Electric Vehicles & Batteries – New GST Rate Benefits

The electric vehicle (EV) revolution is rapidly gaining momentum across India. Driven by a desire for a cleaner environment and attractive government incentives, more Indians are trading their petrol-powered vehicles for electric ones. But beyond the green credentials and lower running costs lies a significant financial advantage that many are yet to fully understand. The key to unlocking these savings is the HSN code for electric vehicles. For both salaried individuals and business owners, knowing the correct HSN code is the first step towards benefiting from a reduced GST rate, making the switch to electric not just an eco-friendly choice, but a financially savvy one. This guide will simplify the HSN codes for EVs and their components, explain the lower GST rate electric vehicles India, and show you exactly how to save money. For businesses, correct HSN classification is also a non-negotiable legal requirement for accurate and compliant GST filing.

What is an HSN Code and Why is it Essential for Your Transactions?

Before we dive into the specifics for electric vehicles, it’s crucial to understand what an HSN code is and the vital role it plays in India’s tax system.

Understanding the Harmonized System of Nomenclature (HSN)

The Harmonized System of Nomenclature, or HSN, is a globally recognized system for classifying goods. It’s an 8-digit code (though often the first 6 digits are used for universal classification) that categorizes over 5,000 products into a logical and legal structure. Think of it as a universal language for trade; it ensures that a product is identified by the same code whether it’s being sold in Mumbai, New York, or Tokyo. This standardization is essential for customs authorities and tax departments worldwide to identify products accurately for assessing duties and taxes.

Why HSN is Crucial for GST Compliance

In the context of India’s Goods and Services Tax (GST) regime, the HSN code is indispensable. Its primary function is to determine the correct GST rate applicable to a product. When a business generates an invoice, mentioning the correct HSN code is mandatory, as it directly informs the tax liability.

Here’s why it’s so important for businesses:

Determines GST Rate: The HSN code is mapped to a specific GST rate slab (e.g., 5%, 12%, 18%, 28%). Using the wrong code can lead to incorrect tax calculation, resulting in penalties.
Mandatory for Invoices: It is a legal requirement for GST-registered businesses to mention HSN codes on their tax invoices.
Simplifies GST Returns: Accurate HSN codes on invoices streamline the process of filing GST returns, particularly GSTR-1, as the data is categorized correctly from the start.

As per GST rules, businesses with an annual turnover of more than ₹5 crore must use a 6-digit HSN code, while those with a turnover up to ₹5 crore must use a 4-digit HSN code for B2B transactions.

The Correct HSN Code for Electric Vehicles: A Detailed Breakdown

Now, let’s get to the core of the matter: identifying the right codes for your electric vehicle. Using the correct HSN code for electric vehicles is the gateway to availing the significant tax benefits offered by the government.

HSN Code for Electric Cars, Two-Wheelers, and Three-Wheelers

Electric vehicles are classified under Chapter 87 of the HSN code system, which covers “Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof.” Here’s a breakdown by vehicle type:

Electric Cars & Motor Vehicles (4-wheelers): Most electric cars and four-wheeled passenger vehicles are classified under HSN Code 8703. This chapter is specifically for “Motor cars and other motor vehicles principally designed for the transport of persons.”
Electric Motorcycles & Scooters (2-wheelers): Electric two-wheelers, including motorcycles and scooters, fall under HSN Code 8711. This category is for “Motorcycles (including mopeds) and cycles fitted with an auxiliary motor.”
Electric Rickshaws (3-wheelers): Electrically operated three-wheelers, like e-rickshaws, are also classified under HSN Code 8703.

Ensuring your purchase invoice reflects the correct HSN code is the most critical step to unlock the electric vehicles HSN code benefits. When buying an EV, always double-check the invoice to confirm the dealer has used the right code.

Where to Verify HSN Codes

While the codes above are standard, it’s always wise to verify them for specific models or new launches. The government provides official tools for this purpose.

Actionable Tip: You can use the HSN Search tool available on the official GST Portal. This allows you to search by code or by the description of the goods.
Official Source: For the most authoritative and detailed list, you can refer to the official tariff schedule published on the CBIC (Central Board of Indirect Taxes and Customs) website.

HSN Code for Batteries in India and EV Chargers

An electric vehicle is more than just its body; the battery and charging infrastructure are its heart and soul. These components have their own specific HSN codes, which are important to know, especially when purchasing them separately for replacement or as a business asset.

HSN Code Batteries India: Lithium-ion and Others

The vast majority of modern electric vehicles run on Lithium-ion batteries. Due to their critical role, they have a dedicated HSN code.

The HSN Code for Lithium-ion batteries is 8507 60 00. This specific classification is crucial as it distinguishes them from other types of batteries and accumulators. Whether you are a business procuring batteries for an EV fleet or an individual buying a replacement, this is the code you will encounter.

HSN Code for EV Chargers and Charging Stations

The equipment used to power up your EV also has a specific classification. EV chargers, including both standalone units and components of charging stations, fall under a broader category for electrical transformers and converters.

The HSN code for EV chargers and charging stations is 8504. This chapter covers “Electrical transformers, static converters (for example, rectifiers) and inductors.” This code applies to the hardware that converts AC power from the grid to DC power to charge the vehicle’s battery.

Unlocking Savings: The 5% GST Rate on Electric Vehicles in India

The government’s push for EV adoption is backed by a powerful financial incentive: a significantly reduced GST rate. Understanding this is key to appreciating the full financial benefit of switching to electric.

The GST Council’s Landmark Decision

In a move to make EVs more affordable, the GST Council made a landmark decision to slash the tax rate. The GST rate on electric vehicles was reduced from 12% to a mere 5%.

This preferential rate is a direct benefit passed on to the consumer and is one of the most substantial electric vehicles HSN code benefits. It’s important to note that this 5% rate applies to a fully built electric vehicle. If components are purchased separately, they may attract a different, higher rate of GST, which we will discuss later.

How You Benefit from the Lower GST Rate

This tax reduction has a tangible impact on the wallets of both individual buyers and businesses.

For Salaried Individuals:
The most direct benefit is a lower on-road price. A 7% reduction in tax makes a significant difference, especially on higher-value models.

Example: Let’s assume you are buying an electric car with an ex-showroom price of ₹15,00,000 (before GST).
- Old GST Rate (12%): The GST would have been ₹1,80,000.
- New GST Rate (5%): The GST is now only ₹75,000.
- This is a direct upfront saving of ₹1,05,000 on the tax component alone!

For Small Business Owners:
The benefits for businesses are twofold, making EVs an extremely attractive asset.

Reduced Capital Outlay: Just like individual buyers, businesses pay less upfront for purchasing company vehicles, which improves cash flow.
Input Tax Credit (ITC): This is a game-changer for businesses. If the electric vehicle is purchased for business use (e.g., transporting goods, sales team travel, not for the personal use of directors), the business can claim the 5% GST paid as Input Tax Credit. This means the GST amount can be offset against the business’s output GST liability, effectively making the net cost of the vehicle even lower.

GST on Batteries and Chargers: What Businesses Need to Know

While the 5% GST on a complete EV is a huge relief, there’s a crucial nuance when it comes to its most vital components: the battery and charger. Understanding this distinction is vital for accurate accounting and tax planning.

The Current GST Rate for Batteries and Chargers

When Lithium-ion batteries (HSN 8507 60 00) and EV chargers (HSN 8504) are sold separately—not as part of a new vehicle—they attract a higher GST rate.

The current GST rate on separately sold Lithium-ion batteries and EV chargers is 18%.

This is a critical point of distinction. If you are buying a replacement battery or setting up a charging station at your business premises, you will be paying 18% GST on these items, not the 5% applicable to the vehicle itself.

Maximizing Electric Vehicles Batteries New Benefits with ITC

At first glance, an 18% GST rate might seem high. However, for businesses, this is where the power of Input Tax Credit comes into play again. This is one of the key electric vehicles batteries new benefits for the commercial sector.

When a business purchases a battery or a charger for commercial purposes, the 18% GST paid on that purchase is not a sunk cost. The business can claim the entire amount as ITC. This credit can then be used to reduce their final GST payment to the government. This mechanism turns the higher tax into a recoverable expense, effectively lowering the net procurement cost for the business and encouraging investment in EV infrastructure.

Conclusion

The Indian government has created a highly favorable financial ecosystem for electric vehicles, and the GST policy is at its heart. By reducing the GST rate to 5%, the barrier to entry for EV ownership has been significantly lowered for everyone. For individuals, this means direct, substantial savings on the purchase price. For businesses, the benefits are compounded through lower capital costs and the ability to claim Input Tax Credit on both the vehicle and its components.

The key to unlocking all these advantages lies in using the correct HSN code for electric vehicles—8703 for cars and three-wheelers, and 8711 for two-wheelers. Correct classification ensures compliance and guarantees you receive the intended tax benefits. As India drives towards a cleaner, electric future, understanding these tax nuances can make your transition both seamless and profitable.

Navigating GST rules and HSN codes can be complex. To ensure you’re fully compliant and maximizing your savings, it’s wise to consult a professional. Contact TaxRobo’s expert team today for seamless GST filing, company registration, and financial advisory services.

Frequently Asked Questions (FAQs)

Q1. What is the current GST rate on electric cars in India?

A. The current GST rate on electric cars in India is 5%, provided the correct HSN code (typically 8703) is used on the invoice at the time of purchase.

Q2. Can a business claim Input Tax Credit (ITC) on an electric vehicle?

A. Yes, if the EV is purchased for business purposes (e.g., transporting goods, as a taxi, for employee travel for official work, and not for personal use of employees/directors), the business can claim the 5% GST paid as ITC.

Q3. Is the HSN code for an electric scooter the same as an electric car?

A. No. Electric cars typically fall under HSN 8703, while electric scooters and motorcycles are classified under HSN 8711. It’s important to use the specific code for the vehicle type.

Q4. I am buying a replacement battery for my EV. What GST will I pay?

A. When purchased separately from the vehicle, a lithium-ion EV battery (HSN 8507 60 00) attracts a GST of 18%.

Q5. Where can I find the official HSN code for my EV model?

A. You can search for HSN codes on the official GST Portal or refer to the tariff schedule on the CBIC website. For complete accuracy and to ensure compliance, consulting with a tax professional from a firm like TaxRobo is highly recommended.