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The Indian government's GST council may bring down the tax rates on lithium-ion batteries used in EVs claims a new report.
Lithium-ion batteries, which are the power source used by battery electric vehicles currently attract a GST tax rate of 18 per cent. However, the new report by LiveMint claims that talks have started between various stakeholders in the Indian government to reduce the GST tax on lithium ion batteries to bring them on par with the rate for EVs.
The current GST rate on EV vehicles is 5 per cent. By bringing the tax on lithium-ion on par with EV vehicles the government is looking to boost its green mobility plans that would make India a global hub for EV manufacturing.
The talk of the drop in GST rates comes as the government looks to draft a policy for EV battery swapping. According to the report, members from NITI Aayog, the premier policy think tank of the Indian government met with representatives of the ministries of new and renewable energy, heavy industries, and other government departments on Tuesday to discuss the battery swapping policy.
NITI Aayog had recently presented its first draft on the battery swapping policy to the government which had suggested that the GST council may look into reducing the differential in tax rates for EVs and lithium-ion batteries. The recent meeting on the EV battery swapping policy featured tax rationalization along with the standardization of batteries to ensure interoperability as part of its agenda.
However, NITI Aayog cannot make decisions on anything related to GST which falls under the purview of the Finance Ministry of the Indian government. At best, the NITI Aayog can send a recommendation to the Finance Ministry with regards to tax rationalization.
The GST council has reduced the tax rates on lithium-ion batteries in the past. In 2018, the GST council reduced the tax rates on lithium-ion batteries from 28 per cent to the current rate of 18 per cent. However, since then, the importance of lithium-ion battery packs has increased as the nation pushes towards electric mobility.
A cut in taxes will come as a big boost for the EV industry in the country. Lithium-ion battery packs account for around 25 to 35 per cent of the overall cost of electric vehicles.
Thoughts On A Potential GST Rate Cut On Lithium-ion Batteries
A reduction in tax rates will help bring down the prices of the electric vehicles sold in the country. This should hopefully help bring EV prices more on par with those of internal combustion vehicles which should no doubt encourage potential owners looking to switch to greener alternatives.
A cut in taxes on lithium-ion battery packs will also encourage more automakers to build EVs in India. The tax rates in the country is what has been keeping many automakers from coming into India. In fact, Tesla, the world's best known electric carmaker, had been pushing the government to cut taxes for a while now.