The government is reviewing a proposal to sharply increase the Goods and Services Tax (GST) on luxury electric vehicles, a move that could impact global carmakers like Tesla and BMW planning to expand their presence in the Indian market.

Officials believe that while EV adoption must be encouraged, luxury models priced at the higher end should not benefit from the same tax advantages as mass-market vehicles. The plan is aimed at striking a balance between promoting sustainable mobility and ensuring revenue generation from high-value purchases.

Industry experts warn that the proposed hike could raise the cost of premium EVs, slowing down demand among elite buyers. However, supporters argue that the focus should remain on making affordable EVs accessible to the broader population, while luxury vehicles contribute more to tax revenue.

Talks are still ongoing, and the final decision is expected after consultations with stakeholders. If implemented, India could join other countries that apply higher tax slabs for luxury cars, regardless of whether they are electric or conventional.