+91-80173-90173 [email protected]
Contact Us
EV ITC Refund Experts Updated March 2026

GST Refund for EV Manufacturers Inverted Duty Structure

Are you an EV manufacturer with ITC piling up every month? You are not alone and you are not helpless. Every EV manufacturer in India pays 18% GST on inputs like battery cells, motors, and wiring harnesses, but collects only 5% electric vehicle GST on finished vehicles. Free assessment, 24hr response.

Talk to Expert

Claim Your EV GST Refund

Fill the form below and our expert will call you back

By submitting, you agree to our Terms & Privacy Policy

⚠ EV ITC Alert Updated March 2026Based on 56th GST Council Notifications. 90% provisional refund available within 7 working days for low-risk applications.

1. What is Inverted Duty Structure for EV Manufacturers?

Inverted Duty Structure (IDS) occurs when the GST rate on inputs is higher than the GST rate on the output (finished goods). For EV manufacturers, this is not an exception it is the standard situation.

You purchase raw materials like lithium-ion battery cells, electric motors, copper wiring, motor controllers, and wiring harnesses all taxed at 12% to 18% GST. But when you sell the finished electric vehicle, the GST rate is only 5%.

This means the ITC you accumulate on purchases can never be fully offset against your output GST liability. The result is a growing pile of unutilised ITC sitting in your electronic credit ledger essentially your own money, blocked by the tax system.

Why EV Manufacturers Face IDS

The government deliberately kept EV output GST at 5% to promote adoption of clean mobility. However, the input supply chain batteries, motors, electronics, metals was not correspondingly reduced. This policy mismatch creates a structural ITC accumulation problem for every EV manufacturer in India.

StageGST Rate
Raw materials (battery cells, motors, wiring)18%
Semi-finished components12% – 18%
Finished Electric Vehicle (output)5%

2. GST Rates on EV Inputs vs Finished Vehicle (2026)

Before filing your refund claim, it is important to know the exact GST rates and HSN codes for all inputs and outputs involved in EV manufacturing.

Raw Material GST Rates with HSN Codes

Raw Material / InputHSN CodeGST Rate
Lithium-ion battery cells8507 6018%
Electric motor / DC motor850118%
Motor controller / PCBA853718%
Copper wiring / insulated cables854418%
Copper wire (bare / refined)740818%
Aluminium parts / profiles760418%
Steel fabricated parts7308 / 732618%
Steel bars and rods721418%
Plastic components392618%
Electronic sensors / semiconductors854218%
Tyres (EV specific)401118%
Braking systems / mechanical parts870818%
On-board charger (OBC)850418%
Wiring harness854418%

Finished EV GST Rates

All finished electric vehicles whether e-scooters, e-bikes, electric cars or electric three-wheelers attract a uniform 5% GST. Notably, GST on EV scooter is 5%, compared to 28% on petrol two-wheelers, making electric two-wheelers significantly more affordable from a tax perspective.

ProductHSN CodeGST Rate
Electric 2-wheelers (e-scooter, e-bike)8711 605%
Electric 3-wheelers8703 805%
Electric 4-wheelers (cars)8703 / 87045%
Electric buses (local bodies, >12 seaters)8702 40Exempt
EV spare parts (not specifically listed)8714 / 870818%

EV Battery 5% or 18%?

This is one of the most common points of confusion for EV manufacturers:

  • EV battery supplied together with the vehicle → 5% GST (follows the vehicle rate)
  • EV battery sold separately (replacement / aftermarket) → 18% GST
  • Lithium-ion battery for non-EV use (electronics, etc.) → 18% GST (HSN 8507 60)

This distinction is critical. IDS primarily affects the vehicle manufacturing line where you pay 18% on inputs and collect only 5% on output.

3. How Much ITC Gets Blocked? The Calculation

IDS Refund Formula Rule 89(5)
Refund Amount = (Net ITC × Turnover of Inverted Rated Supply) ÷ Adjusted Total Turnover − Tax Paid on Inverted Rated Supply

Where:

  • Net ITC = ITC availed on input goods only (input services and capital goods excluded)
  • Turnover of Inverted Rated Supply = Value of EV sales in the tax period
  • Adjusted Total Turnover = Total turnover minus exempt supplies and export turnover
  • Tax Paid on Inverted Rated Supply = Output GST actually paid on EV sales
Important
ITC on input services (freight, job work, consulting) and capital goods (machinery, equipment) is NOT included in Net ITC as per Rule 89(5) and the Supreme Court judgment in Union of India vs. VKC Footsteps.

Hypothetical Example Rs 2 Crore EV Sales

ParticularsAmount
Total purchases (inputs)Rs 1,80,00,000
GST paid on inputs @ 18%Rs 32,40,000
EV sales (output)Rs 2,00,00,000
GST collected on EV @ 5%Rs 10,00,000
Net ITC available (input goods only)Rs 32,40,000
ITC utilised against output liabilityRs 10,00,000
Unutilised ITC (blocked)Rs 22,40,000

Applying Rule 89(5), the maximum refund claimable in this period would be approximately Rs 20–22 lakhs money that rightfully belongs to your business but sits locked in the GST system without a refund claim.

Looking for an inverted duty structure EV calculator? GetMyCA provides a free ITC assessment to help you estimate your exact refund amount before filing. Contact us to get your numbers calculated accurately.

Calculate Your Locked ITC | Get Free Assessment from GetMyCA
EV manufacturer with ITC piling up? GetMyCA assesses your exact refund amount for free Rule 89(5) calculation, GSTR-2B reconciliation, complete eligibility check. No commitment. No hidden charges.
✓ Free EV GST Refund Assessment📞 Call: +91-80173-90173

Mon-Sat 9AM-7PM

4. Who is Eligible to Claim GST Refund Under IDS?

Eligibility Conditions

To claim IDS refund as an EV manufacturer, you must satisfy all of the following:

  • You are a registered GST taxpayer (regular scheme, not composition)
  • Your input GST rate is higher than output GST rate for the relevant supply
  • You have unutilised ITC at the end of the tax period
  • Your ITC accumulation is due to IDS only not due to exports or exempt supplies
  • You have filed all GST returns (GSTR-1, GSTR-3B) up to date
  • Your GSTR-2B matches your purchase invoices

Who is NOT Eligible for GST Refund?

  • You are under the Composition Scheme
  • ITC accumulation is due to nil-rated or fully exempt supplies (not IDS)
  • Goods are specifically covered under Section 17(5) blocked credit list
  • You have pending GST returns or outstanding tax dues
  • You supply zero-rated goods (exports) separate refund route applies
Input Goods Only Capital Goods and Services Excluded
Under Rule 89(5): Input goods (raw materials, components) ELIGIBLE for IDS refund. Input services (freight, job work, consulting, rent) NOT eligible. Capital goods (machinery, plant, equipment) NOT eligible. ITC on capital goods and input services must be separately tracked and cannot be clubbed into your IDS refund claim.

5. Step-by-Step GST Refund Claim Process for EV Manufacturers

Documents Required

DocumentPurpose
GSTR-2B / Purchase invoicesProof of ITC availed
GSTR-1 filed copiesProof of outward supply
GSTR-3B filed copiesNet tax liability evidence
Statement 3AIDS refund working statement
CA certificateCertifying net ITC calculation
Declaration of non-prosecution (if required)As per jurisdictional officer not mandatory in all cases
Cancelled cheque / Bank detailsRefund credit destination

Form RFD-01 Filing Process

1
Login to GST Portal
Login to GST Portal → Services → Refunds → Application for Refund
2
Select Refund Type
Select refund type “Refund of ITC on account of Inverted Tax Structure”
3
Select Tax Period
Select the tax period (monthly or quarterly). System auto-populates Net ITC from GSTR-3B verify carefully.
4
Fill Statement 3A
Fill Statement 3A enter turnover of inverted rated supply and adjusted total turnover. Upload all supporting documents.
5
Submit with DSC or EVC
Submit with DSC or EVC ARN generated. Refund application goes to jurisdictional GST officer for processing.

90% Provisional Refund How It Works

As per amended Rule 91(2) of the CGST Rules (w.e.f. 01 October 2025 CBIC Instruction No. 06/2025-GST), a risk-based provisional refund system is now in place:

  • Low-risk applications: 90% of the claimed refund is sanctioned provisionally within 7 working days of filing RFD-01
  • High-risk applications: Undergo detailed scrutiny by GST officer no provisional refund until verification is complete
  • Officer can withhold provisional refund by recording reasons in writing
  • Remaining 10% released after final verification by the GST officer
Important
The 7-day provisional refund is not guaranteed for all applicants. It applies only to applications categorised as low-risk by the GST system. Maintaining clean GSTR-2B reconciliation and timely return filing improves your chances of being categorised as low-risk.

Timeline How Long Does It Take?

StageTimeline
Provisional refund (90%)7 working days from RFD-01 filing
Final refund (remaining 10%)60 days from date of application
If delayed beyond 60 daysInterest @ 6% per annum payable by department

6. Common Rejection Reasons and How to Avoid Them

1. GSTR-2B Mismatch
If your purchase invoices do not reflect in GSTR-2B (supplier has not filed GSTR-1), your ITC claim will be rejected. Always reconcile GSTR-2B with your purchase register before filing. How to avoid: Chase suppliers to file their GSTR-1 before you file your refund application.
2. Capital Goods Included in Net ITC
Many manufacturers mistakenly include ITC on machinery and equipment in their Net ITC calculation. This is disallowed under Rule 89(5). How to avoid: Maintain separate ledgers for input goods ITC, input services ITC, and capital goods ITC.
3. Input Services Clubbed with Input Goods
ITC on freight, job work charges, consulting fees these are input services and cannot be part of the IDS refund claim. How to avoid: Train your accounts team to correctly classify every purchase invoice.
4. Incorrect Statement 3A Working
Errors in calculating the refund formula wrong turnover figures, incorrect adjusted total turnover lead to rejection or reduced refund amounts. How to avoid: Get Statement 3A verified by a CA before submission.
5. Pending GST Returns
If any GSTR-1 or GSTR-3B is pending for any tax period, the refund application will be rejected outright. How to avoid: Ensure all returns are filed and up to date before applying.

7. Court Rulings in Favour of EV Manufacturers

Orissa High Court Omjay EV Case (2023)
This is the most significant ruling for EV manufacturers in India. The Orissa High Court held that: EV manufacturers cannot be denied IDS refund on the grounds that output tax is lower than input tax. All eligible input goods used in EV manufacturing must be included in Net ITC for the refund calculation. The department cannot arbitrarily restrict the Net ITC considered for the IDS refund formula. This ruling directly strengthens your legal position when the GST department tries to reduce or deny your refund claim.
Advance Ruling Versatile Auto Components (Telangana AAR, 2023)
M/s Versatile Auto Components sought clarity on HSN codes and GST rates for their EV components. The Authority for Advance Ruling, Telangana clarified: Electric vehicles including three-wheelers fall under the 5% GST category. Spare parts for EVs that are not specifically listed are categorised under the general unlisted goods category attracting 18% GST. This ruling confirms the 18% rate on EV spare parts, reinforcing the IDS problem across the EV supply chain.

8. Government Schemes for EV Manufacturers (2026)

PM E-Drive Scheme
Launched in October 2024 as the successor to FAME-II, the PM E-Drive scheme was introduced with a budget of Rs 10,900 crore. Subsidies for electric two-wheelers and three-wheelers (L5 category) were available until 31 March 2026. The scheme has been extended to 31 March 2028 specifically for e-trucks and e-buses. EV manufacturers supplying to PM E-Drive beneficiaries should note that government subsidies directly linked to price are excluded from taxable value under Section 15 of the CGST Act.
PLI Auto Scheme
The Production Linked Incentive scheme for automobiles rewards EV manufacturers based on incremental sales of domestically produced advanced automotive technology products. This incentive is separate from GST refunds and can be claimed simultaneously.
PLI ACC Battery Scheme
The PLI scheme for Advanced Chemistry Cell (ACC) battery storage provides incentives for manufacturers setting up domestic battery manufacturing capacity. Given that batteries attract 18% GST when sold standalone, this scheme helps reduce the structural cost disadvantage.
Industry Alert
There have been periodic discussions around an electric vehicle GST rate hike in India particularly for premium EVs priced above Rs 15 lakh. As of March 2026, no such hike has been implemented. The government has maintained 5% GST on all EVs regardless of price. EV manufacturers should monitor GST Council announcements closely.
⚡ Claim Your EV GST Refund Today
Claiming GST refund under IDS is not a one-time task it is a monthly or quarterly process that requires accurate data, correct formula application, and timely filing. A single error in Statement 3A or a GSTR-2B mismatch can result in complete rejection.
GetMyCA’s GST experts handle end-to-end IDS refund filing for EV manufacturers: ITC reconciliation and ledger segregation, Statement 3A preparation and Rule 89(5) formula calculation, RFD-01 filing and document compilation, response to GST officer queries and rejection notices, tracking provisional and final refund credit.
Free Consultation | No Hidden Charges | Mon-Sat 9AM-7PM
✓ Free EV GST Assessment📞 Call: +91-80173-90173

Frequently Asked Questions

1. Is there GST on electric vehicles in India?+
Yes, electric vehicles attract 5% GST in India as of 2026. This is significantly lower than conventional petrol/diesel vehicles which attract 28% GST plus compensation cess of up to 22%.
2. Can we claim GST refund as an EV manufacturer?+
Yes. EV manufacturers face Inverted Duty Structure because inputs are taxed at 12-18% while finished EVs are taxed at 5%. The unutilised ITC can be claimed as refund under Section 54(3) of the CGST Act via Form RFD-01.
3. Is EV battery GST rate 5% or 18%?+
It depends on how the battery is supplied. If supplied together with the electric vehicle, GST is 5%. If sold separately as a replacement battery, GST is 18%. Lithium-ion batteries for non-EV use (electronics, industrial use) also attract 18% GST under HSN 8507 60 not 28%.
4. How to claim an ITC refund in GST for EV manufacturing?+
File Form RFD-01 on the GST portal, select Refund of ITC on account of Inverted Tax Structure, fill Statement 3A with correct turnover figures, upload supporting documents, and submit. 90% provisional refund is typically credited within 7 working days.
5. Who is eligible to claim GST refund under IDS?+
Any regular GST-registered taxpayer whose input GST rate exceeds output GST rate, has unutilised ITC due to IDS, and has filed all GST returns up to date is eligible to claim IDS refund.
6. Who is NOT eligible for GST refund?+
Composition scheme taxpayers, businesses with ITC accumulation due to exempt supplies (not IDS), and those with pending GST returns or outstanding dues are not eligible for IDS refund.
7. What is the 90% provisional refund in GST?+
As per amended Rule 91(2) of the CGST Rules (w.e.f. 01 October 2025 CBIC Instruction No. 06/2025-GST), 90% of the claimed IDS refund is sanctioned provisionally within 7 working days for low-risk applications. High-risk applications undergo detailed scrutiny with no provisional refund. The remaining 10% is released after final officer verification.
8. Can we claim ITC on car purchase as an EV manufacturer?+
Yes, ITC on input goods used in manufacturing electric vehicles is available. However, ITC on motor vehicles purchased for business use (not for manufacturing) may fall under Section 17(5) blocked credit always verify with a CA.
9. What is an inverted duty structure?+
Inverted Duty Structure is a situation under GST where the tax rate on inputs (purchases) is higher than the tax rate on outputs (sales). For EV manufacturers, inputs attract 18% while finished EVs attract only 5%, creating an IDS situation.
10. Will EVs get cheaper after GST reduction?+
The government has maintained 5% GST on EVs since June 2019 (reduced from 12%). Any further GST reduction on EV inputs particularly batteries and chargers would significantly reduce manufacturing costs and vehicle prices. Industry bodies have been lobbying for a uniform 5% GST across the EV supply chain.