Reduction of GST rate on lithium-ion batteries to 18 per cent is a welcome step, though it is still higher when compared to factory-fitted battery in an electric vehicle and can hamper growth of such vehicles in India, says EV makers' body SMEV.
The Society of Manufacturers of Electric Vehicles (SMEV) said the government should have removed the anomaly of spare lithium-ion batteries attracting higher rates than those fitted originally in electric vehicles (EVs) to reduce long-term cost of ownership.
"We are fine, something has been done by the government to reduce GST on lithium-ion batteries when sold separately. However, some irritants remain as new rate is still higher than a factory-fitted battery in an EV," SMEV Director General Sohinder Gill told .
On Saturday, the GST Council announced reduction in rates on a number of items. The GST on lithium-ion batteries was reduced to 18 per cent from 28 per cent earlier.
"If we look at it, a lithium-ion battery fitted in an EV attracts 12 per cent GST, same as an EV, but it would attract 18 per cent GST when sold separately. So there is a 6 per cent difference," he added.
The difference, he said, could still have big implications on promotion of EVs based on battery swapping models, specially for public transport.
The earlier difference was a major deterrent in battery swapping and battery leasing, he added.
"Most of the electric buses in India are based on battery swapping model. So a 6 per cent increase in spare battery could mean higher cost of Rs 50,000 upwards," he said.
Even for cab aggregators, the extra cost of a spare battery would be around Rs 15,000 while for electric scooter owners, it could mean additional spending of up to Rs 5,000 on buying a new lithium-ion battery, he added.
"These minor irritants could have been done away with at one go although we are thankful to the finance ministry for taking corrective measures to some extent," Gill said.
Ideally, GST on lithium-ion batteries should have been kept the same as 12 per cent for EVs, he added.
The customer has to purchase the batteries once every four to seven years and higher GST therefore, adversely affects the total cost of ownership of EVs, Gill said.
Lohia Auto Industries CEO Ayush Lohia however said the government's move would give the EV sector an impetus.