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Electric Vehicle Industry Seeks Government Support Amidst GST Council's Decision

The Electric Vehicle (EV) industry in India has been striving to make significant progress in recent years. However, the recent decision of the GST Council to reject the reduction of Goods and Services Tax (GST) on lithium-ion batteries used in EVs has left many industry players concerned. In this article, we will explore the implications of the council's decision and the subsequent actions taken by stakeholders to seek government support for the growth and adoption of EVs in the country.

The Refusal of GST Council

The fitment committee of the GST Council recently declined the industry's proposal to reduce the tax on EV batteries. The sector had requested a decrease in the GST rate on batteries from 18 percent to 5 percent, but the committee recommended maintaining the current tax rate. This decision has raised concerns within the EV industry, as stakeholders believe that a reduction in battery taxes would have significantly boosted sales and consumer sentiment.

Seeking Government Support

Despite the setback from the GST Council, industry players remain optimistic about the growth of the EV sector. They are actively seeking government support to expedite the adoption of EVs in India. One of the key requests from stakeholders is the temporary reduction of GST on lithium-ion batteries. The Society of Manufacturers of Electric Vehicles (SMEV), an industry organization, has consistently urged the government to take immediate action in this regard. They argue that the high cost of batteries is a significant barrier for consumers, and a tax reduction would encourage wider adoption of EVs.

Importance of Supporting EV Industry

It is crucial for the government to recognize the significance of the EV industry for India's sustainable future. Beyond the current use of lithium-ion batteries in various applications, including EVs, the government needs to assess the long-term benefits of promoting electric mobility across the country. Uday Narang, Founder and Chairman of Omega Seiki Mobility, emphasizes that a reduction in battery taxes would facilitate the shift to a more environmentally friendly and sustainable transportation ecosystem.

Challenges Faced by EV Manufacturers

The refusal of the GST Council to reduce battery taxes highlights certain challenges faced by EV manufacturers in India. Chetan Maini, the Founder of Sun Mobility, points out the inverted duty structure anomaly that exclusively affects electric vehicle producers. While manufacturers of various types of vehicles can offset their GST, exclusive EV producers face higher input costs than output costs. This issue needs to be addressed to create a level playing field for EV manufacturers and promote the growth of the industry.

Government's Commitment to Indigenous Production and Self-Reliance

While the EV industry seeks government support, the government believes it has already provided ample support to establish an ecosystem for battery-powered vehicles. The Union Road Transport Minister, Nitin Gadkari, anticipates a significant surge in EV sales, leading to a long-term reduction in battery prices. He also highlights the potential of utilizing the recently discovered lithium-ion reserves in Jammu, which could enhance India's competitiveness and reduce reliance on imports.

Exploring Alternatives to Lithium-ion Batteries

In addition to lithium-ion batteries, the government is open to exploring other successful technologies for EVs. Gadkari mentions the potential of sodium-ion and aluminum-ion batteries, among others. This openness to alternative technologies reflects the government's commitment to promoting innovation and diversifying the EV industry.

Promoting Affordable Mobility Solutions

Affordability is a significant factor hindering the widespread adoption of EVs in India. SMEV emphasizes the importance of reducing battery taxes not only for EVs but also for batteries used in swapping stations. This reduction would promote affordable mobility solutions for cost-conscious consumers and encourage the adoption of EVs on a larger scale.

Long-term Benefits of EV Adoption

The government's efforts to promote EV adoption are driven by the potential long-term benefits for India. As the EV market matures and economies of scale come into play, the cost of EVs and batteries is expected to decrease. Nitin Gadkari draws a parallel with the mobile phone industry, where costs have significantly reduced over time due to increased volumes. The government believes that similar cost reductions can be achieved in the EV industry, making electric mobility accessible to a larger segment of the population.


While the refusal of the GST Council to lower taxes on lithium-ion batteries is a setback for the EV industry, stakeholders remain hopeful and continue to seek government support. The government's commitment to promoting indigenous production, exploring alternative technologies, and reducing battery prices provides a glimmer of hope for the industry. By addressing challenges, such as the inverted duty structure, and promoting affordability, the government can create an enabling environment for the widespread adoption of EVs in India. The EV industry's growth is not only crucial for the economy but also for India's sustainable future.

Frequently Asked Questions

Taxpayers can claim GST on services from EV charging stations only when using the electric vehicle for business purposes. No GST can be claimed if the vehicle is used for personal reasons.


In September 2021, electric vehicles were covered under the PLI scheme for automobile and auto components with a significant budgetary outlay for 5 years. The Goods and Services Tax (GST) on sale of electric vehicles has been reduced from 12% to 5%.

Lithium-ion batteries are subject to an 18% GST in India. The electric vehicle industry in the country is requesting an extension of the FAME II (Faster Adoption & Manufacturing of Electric Vehicles) subsidy and a reduction in the GST on lithium-ion batteries to help facilitate the transition to electric vehicles.


The government has introduced Income Tax Section 80EEB to provide attractive tax incentives for those interested in purchasing electric vehicles. This section allows electric vehicle owners to receive a significant tax exemption of up to Rs 1.5 lakh on the interest paid for the loan amount.


The GST rate for electric vehicles is 5%,

which is lower than the rate for petrol and diesel vehicles.


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