Image used for representative purposes only.
Image used for representative purposes only.

GST rate cut for lithium-ion batteries for EVs

27th Jul 2018 4:03 pm

GST on fuel-cell vehicles, biofuel pellets and ethanol sold to oil companies also reduced.

The Government has revised GST (Goods and Service Tax) rates on lithium-ion batteries for electric vehicles. The announcement was made following the 28th GST Council Meeting held last week. GST on lithium-ion batteries for EVs has been brought down to 18 percent from the prevailing 28 percent rate. The reduction comes as welcome news to EV makers in India. In 2017, the Society of Manufacturers of Electric Vehicles (SMEV), the nodal body of electric vehicle manufacturers in India, had urged the government to reduce the GST charged on batteries used in electric vehicles.

While the new GST rate has come into effect, EV prices have not been impacted, at least as yet. Mahindra Electric’s e2o Plus and e-Verito see no price change and even two-wheeler EV start-up, Ather, confirmed there will be no change in prices for its scooters. The two-wheeler EV brand did confirm, however, the lowered GST rate will “affect future battery replacement costs”.

The government has also lowered the rate of GST on fuel-cell vehicles from 28 percent to 12 percent. A promising solution for zero tail-pipe emissions transport, fuel-cell vehicles are also a long time away from becoming mainstream, essentially thanks to the challenges of distributing and storing hydrogen. It’s unexpected, then, that the lower GST will spur carmakers such as Toyota and Honda to bring in their Mirai and FCX Clarity fuel-cell vehicles to India any time soon.

Also revised are GST rates on biofuel pellets (down to 5 percent) and the GST on sale of ethanol to oil companies from 18 percent to 5 percent. The government has, in the past, announced plans for a 10 percent ethanol blend in petrol, though inadequate ethanol production has meant the level has not yet been achieved. Cheaper ethanol and bio-diesels have been touted as among measures that could help bring down India’s crude oil import requirements. 

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