GST fitment committee proposes no tax cut for EV batteries, tobacco products

Lithium-ion batteries may continue to attract 18 percent GST. The GST Council is expected to meet on October 7

The Goods and Service Tax (GST)'s fitment committee has rejected the industry's demand to lower the tax on EV batteries, tobacco products and proposed status quo ahead of October 7 Council meeting, sources told Moneycontrol

The industry had sought uniform additional compensation cess on cigarettes, bidis, smokeless tobacco products and lower compensation cess on cigarette sticks up to 70 mm. The industry had also sought lowering of GST on electric vehicle (EV) batteries from 18 percent to 5 percent.

"The fitment committee has recommended to maintain status quo for both tobacco products and EV batteries," a source told Moneycontrol.

Tobacco products such as cigarettes, chewing tobacco, gutkha, etc. attract GST, Compensation Cess, Basic Excise Duty and National Calamity Contingent Duty (NCCD), while Bidis attract GST, Basic Excise Duty and National Calamity Contingent Duty (NCCD).

While GST rate on cigarettes, bidis is at 28 percent, there is no cess on the latter which has remained unchanged. The Compensation Cess rate levied on tobacco products has been linked to retail sale price and is leviable at a rate ranging from 8 percent to 69  percent. In the Union Budget 2023-24, the NCCD rate on specified cigarettes has been revised upwards by about 16 percent with effect from February 2, 2023. which is expected to lead to increased collections of GST.

"Bidi is in fact, a household industry in certain parts of India. Significant number of workers are engaged in the manufacture of bidis and are rolled mostly by women at home. Thus it becomes a livelihood issue and there is no cess levied on it," the source said.

GST on EV battery

Moneycontrol has learned that lithium-ion batteries is likely to continue to attract a GST rate of 18 percent as per fitment committee's proposal.

"Lithium ion batteries attract a GST rate of 18 percent, which is already lower than the 28 percent GST rate charged on other electric accumulators and  batteries. We may not consider request," sources said.

Electric vehicles generally use lithium ion batteries. Lithium ion batteries have multiple uses i.e. cellular mobile phones, portable electronics, electric vehicles etc.