The government will consider the demand made by Tesla to reduce the import tax on electric vehicles, only when the company will increase the purchase of goods used in its vehicles in India. A source familiar with the matter said that the government also wants to know from the company what plans it has made for the production of its electric vehicles in India.
The ministry of heavy industries and finance had sought details of production and procurement from the company in a meeting held earlier this month. At present, the government is investigating Elon Musk's demand to reduce the tax on electric vehicles.
According to the source, the concerned departments have also asked Tesla what it thinks about importing knocked down units or semi-built vehicles instead of importing fully built cars. In fact, knocked-down units or under-built cars attract less import tax than vehicles fully prepared to run on the roads.
A knocked down unit is one that contains everything needed to make a vehicle, but in a separate unit. Such a unit is assembled after being imported.
California-based Tesla wrote a letter to the Modi government in July, demanding reduction in the tax on the import of electric vehicles. An import duty of 60% is imposed on a vehicle imported from abroad for $40,000 or less, while a vehicle costing more than $40,000 will attract an import duty of 100%.
Tesla wants to reduce the import duty on both cheap and expensive electric vehicles to 40%. It also remove the social welfare surcharge of 10%. The proceeds from this surcharge are used for health and education programs.
In the meeting, Tesla had claimed that it has bought components worth about $100 million from India so far. He had also said that if there is any concession in tax, then his procurement from India will increase.
The company has also said that, it will make major investments directly to build sales and service and charging stations. It has said that it will also consider investing in large scale for manufacturing.
Musk has been showing interest for many years in doing business in this country of immense potential. But they complain that they are not able to test the market with imported cars due to high taxes. They say that due to the high import duty, their electric vehicles will not be able to remain economical here.
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