In a bid to encourage the purchase and use of electric vehicles in India, the GST Council, in its recent meeting held on 21st July 2018, has decided to reduce the GST (Goods & Services Tax) rate on lithium-ion batteries used in electric cars to 18 per cent from the earlier 28 per cent tax rate. The GST rate on fuel cell vehicles has also been reduced to 12 per cent now.
The Council’s decision of reducing the tax rate on electric vehicle batteries is expected to lower the overall cost of purchasing and maintaining electric vehicles in the country, thus motivating more people to buy and use them. The step will also encourage car manufacturers to launch more electric battery powered vehicles in India and battery manufacturers to produce vehicle lithium-ion batteries for the Indian auto market.
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The present status of electric car sales in India is not very good, with most of the electric car manufacturers relying on imported batteries to build and sell these vehicles in India. The recent increase of 10 per cent on the import duty on lithium-ion batteries had further discouraged this growth.
The decision to reduce GST arate on lithium-ion battery packs along with fuel cell vehicles was taken in the 28th GST Council Meeting which was held on 21st of July. Ever since the launch of the GST system, the higher tax rate on electric vehicles along with their batteries has been a big problem and somehow limited the growth of electric cars in the country. The government is determined to increase the use of electric vehicles as a step to deal with the pollution problem.
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The move to decrease GST on batteries and other related items will definitely increase the sales and manufacturing of electric vehicles in India.