Government considers slashing tax on lithium-ion batteries to boost electric mobility

Representative image (Source: Shutterstock)

The government may cut the goods and services tax (GST) on lithium-ion batteries and bring them on a par with taxes on electric vehicles (EV) which are at the minimum rate of five per cent, according to a Mint report.

Lithium-ion batteries are taxed at 18 per cent. Discussions on tax rationalisation have gained momentum with the push for battery swapping policy. EV sales in April was 72,519 units, a sharp rise from the 14,179 units sold a year ago but lower than March sales of 77,243 units.

Also Read: Lithium Ion Batteries vs Hydrogen Fuel Cell: Which is the technology of the future?

Government think-tank NITI Aayog, the ministries of new and renewable energy, heavy industries, and other government departments held their first meeting on June 7 on the battery-swapping policy.

Along with tax rationalisation, the standardisation of batteries to ensure interoperability was also on the agenda of the meeting, according to the report.

The government is looking at various ways to accelerate its green mobility plans. Any change in the tax will have to be done by the GST Council but the Niti Aayog is expected to make a recommendation.

The council last cut GST rate on lithium-ion batteries from 28 per cent to 18 per cent in 2018. Now, with greater emphasis on the electric mobility ecosystem and more automakers entering the space, there is a renewed demand for price parity between batteries and EVs, as the latter are taxed a much lower five per cent.

In December, NITI Aayog chief executive Amitabh Kant said the government is working on reducing GST on EV batteries. Further, the draft policy issued by the think tank recommended the rationalisation of tax on batteries.