GST on EV batteries likely to be reduced to bring down the cost of electric vehicles

Electric vehicles in India, which have recorded an unprecedented growth over the last couple of years, are expected to become more affordable. As per the reports, the Goods and Services Tax (GST) Council may bring down tax rate on the lithium-ion battery, which is one of the most expensive components inside an electric vehicle. The Council may reduce GST on the EV batteries at par with electric vehicles which could mean a major drop in overall price of electric cars and two-wheelers in India.

According to a report published by Mint, talks have started among stakeholders at the Centre to go ahead with the plan. A meeting was held on Tuesday to discuss battery-swapping policy between members from NITI Aayog, ministries of new and renewable energy, heavy industries, and other government departments. Suggestions were moved rationalise tax and standardise EV batteries. NITI Aayog is preparing a draft policy which will be sent to the GST Council for further consideration.

Reportedly, talks have initiated among stakeholders at the Centre to go ahead with the plan. A meeting was conducted on Tuesday to discuss battery-swapping policy between members from NITI Aayog, ministries of new and renewable energy, heavy industries, and other government departments. Suggestions were made to rationalise tax and standardise EV batteries. NITI Aayog is preparing a draft policy which will be sent to the GST Council for further consideration.

The draft policy sent by NITI Aayog reads, “As per the current GST regime, tax rates on lithium-ion batteries and electric vehicle supply equipment (EVSE) are 18% and 5%, respectively. The GST Council, the decision-making body on GST provisions, may consider reducing the differential across the two tax rates. The council will take an appropriate decision in this regard at a suitable time.”