No tax cut for Tesla as Indian government says tax poses no disadvantage

New Delhi: the Indian government will not be cutting taxes on imported electric vehicles as requested by Elon Musk's international Tesla company, citing that the company benefits from Bringing in partially-built vehicles and assembling them at a lower cost.

Vivek Johri, chairman of the Central Board of Indirect Taxes and Customs, said that the government has looked at the current tax structure to check if it needs to be rejigged, but some domestic production is already happening and some investments have come in with the current tariff structure.

He also said that the current tax structure is not a hindrance, which indicates that the Indian government is not interested in reducing import tax as Tesla has been demanding.

Elon Musk, Tesla's billionaire founder, has expressed interest in manufacturing and selling his electric vehicle line in India but has cited high import costs and other issues with the government as roadblocks. Imported car tax can go as high as 100 % for imported electric vehicles. The Indian government levies import duties between 15-30 % on parts shipped for assembly in the country.

Tesla should follow the lead of domestic companies like Mahindra & Mahindra Ltd. and Tata Motors Ltd., which are investing in building local capacity for electric vehicles, Johri said.

"There are others importing completely built units. That route is open," he said.

Several other automobile companies have expressed reservation over allowing tax cuts for Tesla to bring completely-adsembked vehicles to sell in India. Media reports suggest that the reason may be due to fears of unfair competition from the US-based company.

Despite expressing its interest in selling its cars in India, Tesla is yet to present any plan for local manufacturing and procurement from India, even though the government has asked for it. India has asked Tesla to consider importing knocked-down units (CKD) or partially built vehicles, which would attract a lower import levy, instead of CBU models.

In the meantime, at least five Indian states have shown their interest in providing Tesla facilities to set up its electric car manufacturing facility, including Telangana, Tamil Nadu and Maharashtra.