Electric vehicles without battery packs qualify for 5% GST rate under HSN 8703 classification

The AAR, Odisha ruled that two or three-wheeled electric vehicles supplied without battery packs qualify as electrically operated vehicles under HSN 8703 and are eligible for 5% GST rate. The Authority determined that fitting of battery at or before supply is not a precondition for classification as electrically operated vehicles. The vehicles without batteries are complete transportation agents propelled by motors that function once batteries are fitted, thus meeting the definition under Entry 242A of Notification No. 1/2017.

---

---

Issues:
Interpretation of GST rate on electrically operated vehicles without fitted batteries.

Analysis:
The Applicant sought an advance ruling on whether fitting batteries in two and three-wheeled battery-powered electric vehicles is mandatory to avail the 5% GST rate for electrically operated vehicles. The Applicant argued that vehicles without batteries are complete to function as transportation agents and fall under the definition of electrically operated vehicles. They cited a judgment stating that fitting batteries is not a prerequisite for classification. The Central Jurisdictional Officer referenced a case where a vehicle without a battery pack was not considered an electrically operated vehicle. The definition of electrically operated vehicles was examined, emphasizing the use of electrical energy derived from batteries for propulsion. The ruling concluded that fitting batteries is not mandatory for classification as an electrically operated vehicle, confirming that such vehicles, with or without batteries, are taxable at 5% GST rate.

The ruling was based on the interpretation of the definition of electrically operated vehicles and the applicability of the GST rate on such vehicles without fitted batteries. The Applicant's arguments, supported by relevant judgments, highlighted that the presence of batteries is not a determining factor for classification. The ruling clarified that electrically operated vehicles solely reliant on electrical energy from batteries, regardless of pre-fitted batteries, qualify for the 5% GST rate. The ruling emphasized that vehicles running on battery power, even if not initially fitted with batteries, are classified as electrically operated vehicles and subject to the specified GST rate.

The ruling acknowledged the arguments presented by the Applicant and the Central Jurisdictional Officer regarding the classification of electrically operated vehicles without fitted batteries. The decision was based on the definition of electrically operated vehicles and the requirement for propulsion solely from electrical energy stored in batteries. It was established that the presence of batteries, whether fitted before or after sale, does not alter the classification of electrically operated vehicles. The ruling provided clarity on the GST rate applicability for such vehicles, ensuring consistent taxation treatment for electrically operated vehicles with or without fitted batteries.

---