Govt may slash GST on lithium batteries from 18% to 5%

Li-ion batteries are currently taxed at 18%, while EVs attract a 5% tax

The government may reduce the goods and services tax (GST) levied on lithium-ion batteries to tax them at the same level as EVs to boost the government's green mobility plans. Li-ion batteries are currently taxed at 18 per cent, while EVs at 5 per cent.

A push for tax rationalisation is an old idea that regained momentum due to the Centre's renewed push for battery swapping policies, sources told Mint.

The NITI Ayog, the ministries of new and renewable energy, heavy industries and other departments met for the first time on June 7, wherein tax rationalisation and battery standardisation to ensure interoperability were reportedly on agenda.

NITI Aayog can only suggest rationalisation and the final decision rests with the GST Council. The tax on li-ion batteries was last cut in 2018 from 28 per cent to 18 per cent. There is now renewed support for a reduction in tax with the government's EV push.

“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,” read the draft policy.

The final policy is expected to be developed by the government in three months.