09.06.2022: GST Council may bring rate on lithium-ion batteries on par with Electric vehicles

India may cut the goods and services tax on lithium-ion batteries and bring them on a par with taxes on electric vehicles to give a fillip to its green mobility plans.

Discussions have begun among various stakeholders in the Union government on ways to proceed with the plan, which is crucial to making the country a global manufacturing hub for electric vehicles (EVs).

Currently, EVs are taxed at 5%, while lithium-ion batteries are taxed at 18%. There have been considerations of tax rationalization on lithium-ion batteries earlier, but with the push for battery swapping policy, the talks have again gained momentum, said people in the know of the developments.

The NITI Aayog, the ministries of new and renewable energy, heavy industries, and other government departments held their first meeting on Tuesday on the battery-swapping policy. This followed receipt of suggestions and recommendations on the draft policy until 5 June. Along with tax rationalization, standardization of batteries to ensure interoperability was also on the agenda of the meeting, the people said.

NITI Aayog, however, would not delve much on the goods and services tax (GST) issue as it is under the finance ministry’s purview, they said, adding that the policy think tank can at best send a recommendation on tax rationalization.

Any decision on changing GST would have to be taken by the GST Council.

The council last cut GST rate on lithium-ion batteries from 28% to 18% in 2018. Now, with greater emphasis on the EV ecosystem and more automakers entering the fray, there is a renewed chorus for a price parity between batteries and EVs, as the latter is taxed much lower at 5%.

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 rationalization of tax on batteries.

“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,” the draft policy said. The government think tank also suggested an existing scheme be revised or a new scheme be launched to provide subsidies to developers of battery-swapping stations.

The government is expected to develop the final policy in around three months.

Queries sent to NITI Aayog, the ministries of new and renewable energy, heavy industries and finance remained unanswered till press time.

Experts said India’s EV ambitions may suffer a setback without the rationalization of GST rates on lithium-ion batteries.

The Centre has been making efforts to boost the manufacturing of EVs and batteries. It launched the production linked incentive scheme for advanced chemistry cell battery storage with an outlay of 18,100 crore to attract companies in the sector. Meanwhile, domestic EV sales this April stood at 72,519 units, a sharp rise from 14,179 vehicles sold a year earlier but lower than March sales of 77,243 units, according to government data.

Source: Live Mint 

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