EVs in India set to become cheaper as government cuts GST on battery packs

Batteries make up almost 50 percent of the cost of electric vehicles.

Highlights
  • GST Council has slashed GST rates, making them standard at 5 percent across the EV industry in India.
  • The new concessional GST rate stands at 5 percent for EVs with or without battery pack.
  • Lithium-ion battery packs were earlier taxed at 18 percent.

The Indian Government has slashed GST rates on lithium-ion battery packs from 18 percent to five percent, thereby marking a uniform GST rate of 5 percent across the EV industry. This is expected to reduce the prices of electric vehicles in India, as 50 percent of the cost component of EVs is the battery. This is the second time the Indian Government has slashed GST rates on batteries. In 2018, the government had brought down the GST to 18 percent from 28 percent.

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The Indian EV market has heated up in the past couple of years with an increasing number of manufacturers setting up shop across the country. Many new startups in the recent past have made a debut in the market too and many have an all-electric product portfolio as well. 

Government slashes GST rates on EVs

Electric vehicles, whether or not fitted with a battery pack, are eligible for the concessional GST rate of 5 percent,” a statement by the Finance Ministry read. The decision was taken during the 47th meeting of the GST Council and was held in Chandigarh on June 28th and June 29th. The meeting was chaired by Finance Minister Nirmala Sitharaman.

This comes as a big power up to the EV industry in India. The growing industry was looking for some government intervention to promote the adoption of EVs in real life. Akshit Bansal, CEO of electric vehicle (EV) charging network provider, Statiq, in an interview to IANS, said “This move will encourage the industry to pass on more cost benefits to the users and also lend a necessary push to people who are still looking for incentives to adapt to the EV way-of-life.”

In December last year, NITI Aayog CEO Amitabh Kant had said the government was working on reducing the rates on EV batteries.