IESA Demands 10-Year Tax Holiday On Standalone Battery Energy Storage Using Renewables

India Energy Storage Alliance (IESA) advocates for a 10-year tax holiday for standalone renewable battery storage projects in its pre-budget proposal.
IESA Demands 10-Year Tax Holiday
IESA Demands 10-Year Tax Holiday

Industry body India Energy Storage Alliance (IESA) has demanded a 10-year tax holiday for projects with standalone battery energy storage using renewable energy.

In a pre-budget memorandum sent to the finance ministry, IESA also suggested to exempt custom duty for energy storage systems being imported particularly from the countries where India has ties on free-trade agreements like Korea, Taiwan, Japan, Vietnam, the USA, EU countries etc.

Rahul Walawalkar, Founder and President of India Energy Storage Alliance and President & MD, of Customized Energy Solutions (CES), India said the country has a great opportunity to become a global hub for supply chain of advanced battery manufacturing ecosystem.

IESA expects the upcoming Union Budget 2024 to consider a special incentive program for battery raw materials and chemical processing and tax incentives which will bring more investments to India's fast-growing energy storage industry.

In its memorandum, the IESA emphasized on 10-year tax holidays for projects with standalone battery energy storage using renewables to charge the battery, Storage with Transmission element, & Storage with Renewable plants.

It also asked for a GST reduction for various energy storage.

According to the current GST regime, the tax rates on lithium-ion batteries are 18 per cent. The GST for advanced batteries on the higher side ranges between 18 per cent to 28 per cent.

Other than lithium-ion, all other battery chemistries are attracting 28 per cent GST, it pointed out.

The IESA has suggested that the government considers the reduction in the GST rate and bring a uniform rate of 5 per cent GST. The body has also asked for avoiding double taxation on energy storage systems.

In line with the principles of double taxation avoidance, Electricity Duty (ED) and Cross Subsidy Surcharge (CSS) may not be made applicable on input power for charging ESS, as these systems are merely facilitating conversion of energy where electricity is stored during off peak hours and discharges during peak hours.

The ED and CSS may only be levied on the final consumption of electricity, it suggested.

Given the large-scale requirement of battery storage in India, IESA has requested to increase the capacity of the production-linked incentive scheme of ACC Battery Manufacturing of capacity from the current 50GWh to 100 GWh catering requirements of the EV sector and stationary storage applications.

The Indian government has set an ambitious target for battery manufacturing in the country. It aims at setting up a cumulative 50 GWh of capacity for advanced chemistry cells (ACC) by 2025.

IESA has requested to extend other benefits like affordable funding and easy access, common facility centres for manufacturing clusters (training Centre, quality lab, skill development Centre etc which can benefit entire Industry), Public procurement order etc. to Micro, Small and Medium Enterprises (MSME).

IESA has also recommended that India set a roadmap to increase its GERD (Gross domestic expenditure on R&D) to 2 per cent of GDP by 2030. This requires increasing the Central Government spending on R&D by 20 per cent annually starting in 2023-24 through 2030, with a commensurate increase in the Extramural R&D funding.

According to Debi Prasad Dash, Secretary, US-India Energy Storage Taskforce (ESTF) and Executive Director, IESA, in a bid to support the research and innovation in energy storage and batteries, the government should think of establishing a central institution called the National Institute for Energy Storage to advance India's R&D roadmap in this sector.

"We also request the government to consider funding PPP projects and industry-academic institutes towards advanced technology developments," Dash added.

It also stressed that RBI should create a separate lending arm within its lending portfolios like retail, housing, corporate, etc. It also asked to reduce the reduction of GST on electrolyzers (equipment used to produce green hydrogen) from 18 per cent to 5 per cent.

It also suggested reduction of GST on hydrogen that qualifies as green hydrogen from 12 per cent to 5 per cent.

IESA is a leading industry alliance focused on the development of advanced energy storage, green hydrogen, and e-mobility technologies in India.

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