Government Could Reduce GST On Lithium-Ion Batteries: Report

The auto industry could get a further fillip for the push towards electric mobility with a downward revision on GST on lithium-ion batteries being considered. Currently, while electric vehicles attract a GST of 5%, their battery packs – mainly lithium-ion batteries – attract a higher rate of tax at 18%. As per a report by The Mint, discussions amongst various stakeholders within the Central Government have commenced on how to proceed with a cut in GST on EV batteries. While the topic was also previously brought up for discussion the push for the adoption of a battery swapping policy has reportedly re-ignited the matter.

NITI Ayog recently held its first meeting with various government departments including the ministeries of new and renewable energy and heavy industries over its proposed battery swapping policy. The draft policy was released to the public in April this year to get suggestions and recommendations from industry people and the public by June 5. As per the report, the topics brought up during the meeting included tax rationalisation and standardisation of batteries – a key step to implement battery swapping technologies.

Niti Aayog had recommended a reduction in GST on EV batteries in its draft battery swapping policy.

The decision to change the GST rate however lies with the GST Council with NITI Aayog at best able to recommend changes to the tax policy. Tax on lithium-ion battery packs was last adjusted in 2018 when the GST council reduced the GST from 28% to 18%. However now with the push toward electric mobility, there has been a renewed call to further reduce GST rates on battery packs and bringing them to the same level as those charged for EVs -5%. Niti Aayog had proposed the same in its draft battery swapping policy.

The battery swapping policy is expected to be finalised by the government in the coming months and a change in GST rate could also be made.

Also read: Electric Mobility Sector Welcomes NITI Aayog's Battery Swapping Policy Draft, Need Technical Standardisation Say Some Players

The reduction in GST on EV battery packs should provide a further stimulus to the growing electric vehicle market in India. The industry has already received a number of incentives from the various state governments and the union governments in the form of purchase incentives, the Fame 2 scheme and the new Production Linked Incentive scheme.