The Goods and Services Tax (GST) Council reduced the rate payable on electric vehicles to 5% from 12%.
Additionally, the rate applicable to electric chargers and charging stations has been cut to 5% from 18%.
The price difference between petrol and diesel vehicles and electric alternatives means that they have not really been an option for most.
But on top of encouraging more people to choose environmentally friendly modes of transportation, the change will ultimately improve air quality, which has been a long-standing concern.
The benefits will take some time to appear, however, as it is expected that it will be more than two years before there is a decent rise in demand.