The GST Council's fitment committee has rejected the Electric Vehicle (EV) industry's proposal to reduce the Goods and Services Tax (GST) rate on electric vehicle batteries from 18 per cent to 5 per cent.
The committee recommended maintaining the current rate as lithium-ion batteries have multiple uses, including in mobile phones, portable electronics, and electric vehicles, according to a report in CNBC-TV18.
It is important to note that built-up EVs are subject to a 5 per cent GST, while lithium-ion batteries and charging stations are charged at 18 per cent.
Union Minister Nitin Gadkari, recently encouraged the auto industry to focus on alternate fuels and electric vehicles, while Secretary of the Ministry of Heavy Industries, Kamran Rizvi, stated that the government has not yet decided on the rollout of the Faster Adoption and Manufacturing of Electric Vehicles Scheme (FAME III) and the impact of decreased subsidies for EVs.
The FAME II scheme has also been modified, dropping the subsidy on electric two-wheelers to Rs 10,000 per kWh and the maximum subsidy cap from 40 per cent to 15 per cent.
Earlier in June 2022, a statement by the Finance Ministry held, “Electric vehicles, whether or not fitted with a battery pack, are eligible for the concessional GST rate of 5 per cent.”
However, charging EVs at charging stations outside attracts 18 per cent GST. This was clarified in a ruling by the Karnataka Authority for Advance Ruling (AAR) when an applicant had asked whether charging EVs can be treated as exempt as per GST law.