[Sabyasworld]

Proving another impetus to the domestic EV industry, the government of India recently reduced the GST for lithium-ion battery packs from 18 % to 5%; giving rise to a wide possibility of Indian EVs coming at a much lower cost because 50% of the EV cost comes from its battery price.

“Electric vehicles, whether or not fitted with a battery pack, are eligible for the concessional GST rate of 5 percent,” the Finance Ministry statement read.

The decision of lowering GST rate on lithium-ion battery packs from 18% to 5% was taken recently at the 47th GST Council meeting in Chandigarh. The council meeting was chaired by Finance Minister Nirmala Sitharaman.

It is to be noted here that the government had earlier reduced GST from 28% to 18% on lithium-ion batteries in 2018. This is the second such instance when the GST Council has brought down the tax rate.

The Indian EV industry has been on a ride with several unfortunate instances where several e-scooters caught fire and injured people. Presently, the government has set up a panel to investigate the matter.

https://egov.eletsonline.com/2022/07...battery-packs/

[SKC-auto]

Gadkari says this few days back.

"I am trying...within one year, the cost of electric vehicles will be equivalent to the cost of petrol vehicles in the country and we will save money spent on fossil fuels,"

[hrman]

Good move by the Govt. Perhaps they are prepared to see their GST earnings "Burning up" like many batteries on EVs.

On a more serious note, Im not sure if the EV makers will be in a hurry to pass on this benefit to consumers. Reasons like large inventory of batteries at older rates, higher input costs, more spend on R&D etc. If it does translate to lower EV costs in actual terms, we as the consumer will benefit.

[maint1234]

Very bad decision. Totally discourages the companies planning to set up battery cell manufacturing units in India.
Countries like china with their government subsidized manufacturers are going to flood the Indian market with batteries, so much for atma nirbhar.
Zero consistency in policy decisions with regards to encouraging manufacturing in India.

[KL01toKA03]

Originally Posted by maint1234

Very bad decision. Totally discourages the companies planning to set up battery cell manufacturing units in India.
Countries like china with their government subsidized manufacturers are going to flood the Indian market with batteries, so much for atma nirbhar.
Zero consistency in policy decisions with regards to encouraging manufacturing in India.

I don't know how this will have any impact on imports. I do not see any mention of import duty cuts. Reducing the GST should ideally reduce prices, thereby increasing EV adoption, and combined with enough import duty would promote manufacturing in India.

[maint1234]

Originally Posted by KL01toKA03

I don't know how this will have any impact on imports. I do not see any mention of import duty cuts. Reducing the GST should ideally reduce prices, thereby increasing EV adoption, and combined with enough import duty would promote manufacturing in India.

You are right, I misread it as customs duty.

Cutting GST is a good decision.

[rishil.ghurki]

This is interesting. I wonder then, if the cost of replacement batteries would also go down or if it would only affect new EV sales.

As an owner of an Ather 450x, I was quoted an estimate of Rs.66k for a total battery replacement, post warranty-period. Although I am confident that the Li-ion battery in the 450x is capable of at least 60k km, which would take me more than 5 years of riding to cover, I can always rest assured if the price does decrease.

While I feel that there's still quite some time required for EVs to become mainstream, even if the prices go down, I feel that there's better potential for EV two-wheelers, as the adaptivity and learning curve is lesser than the cars. Many MCWOGs like the Honda Activa, Suzuki Access can be easily accepted in their EV form, for such a user market.

In general, I've noticed a premium of Rs. 40-50k for an EV scooter over its (almost equivalent) ICE scooter counterpart. I'm not exactly sure how much of this premium is due to the battery, but any move that brings the prices of the two closer is a welcome move, as it portrays EVs not just highlighting their compromise, but as a worthy alternative.

[kaps1311]

Originally Posted by maint1234

Very bad decision. Totally discourages the companies planning to set up battery cell manufacturing units in India.
Countries like china with their government subsidized manufacturers are going to flood the Indian market with batteries, so much for atma nirbhar.
Zero consistency in policy decisions with regards to encouraging manufacturing in India.

The import customs duty of lithium-ion packs are kept at 20% which directly impacts the cost. Whereas the import of parts required for the manufacture of lithium-ion vary from 5% to 15%. This ofcourse encourages manufacturing in India as compared to importing. Reducing GST may not impact much as the same can be used by the companies as credit and set-off's. Over a period the Government should start increasing customs duty on the parts as well so as to encourage building the required eco-system (ancillary industries) in India. Only then we can see reduction in prices.

[speedmiester]

Originally Posted by Sabyasworld

https://egov.eletsonline.com/2022/07...battery-packs/

Sorry to burst your bubble, this will have no effect for end consumers as the GST on EVs is already at 5%.

This will benefit OEMs who used to pay 18% GST for the batteries and sell it to consumers at margin+5% GST.
The difference GST amount was claimed from the Govt, this used to take time and govt used to pay 6% interest on the dues.
This has now been rationalized. End of the day, this has reduced burden on the Govt and the OEMs as they no longer need to wait for refund.

[harsh_66328]

Originally Posted by SKC-auto

Gadkari says this few days back.

"I am trying...within one year, the cost of electric vehicles will be equivalent to the cost of petrol vehicles in the country and we will save money spent on fossil fuels,"

Looking at the current rise in car prices it very much seems possible, though the other way around - 'Within one year, the cost of petrol vehicles will be equivalent to electric vehicles'

Same result, different approach.

[Maverick1977]

I am highly doubtful if the benefit will be passed on to the end consumer, the only one benefitting could be the manufacturers.
Case in point: GST on food was 18%, there was a lot of opposition by restaurant owners and their likes. The Govt. then reduced it to 5%. I still recall, McDonald's and all similar outlets immediately increasing their prices to match the difference. So, in the end the consumer was still paying the same amount.
I am afraid this might repeat here also. The reasons for doing this, input cost, R&D costs will be cited and no real benefit is likely to trickle in the market.
Considering EV is still a relatively new concept/product expecting the prices to fall and come on par with ICE powered cars could be a.wishful thinking. My worry is on one hand Govt. reducing GST in EVs and then increasing the cost for electricity, especially when you start crossing the higher usage slabs.

Only time will tell if this is a good move.

[aim120]

Originally Posted by speedmiester

Sorry to burst your bubble, this will have no effect for end consumers as the GST on EVs is already at 5%.

This will benefit OEMs who used to pay 18% GST for the batteries and sell it to consumers at margin+5% GST.
The difference GST amount was claimed from the Govt, this used to take time and govt used to pay
This has now been rationalized. End of the day, this has reduced burden on the Govt and the OEMs as they no longer need to wait for refund.

But what about a replacement battery, for example a Nexon EV battery is listed as 7.47lakh on boodmo. I am guessing it was taxed at 18% but now will be taxed at 5%.

Lead acid battery is taxed at 28%, so now price gap between lithium and lead acid battery will decrease, this will have a big impact on solar energy storage.

[lina]

Originally Posted by Maverick1977

I am highly doubtful if the benefit will be passed on to the end consumer, the only one benefitting could be the manufacturers.
Case in point: GST on food was 18%, there was a lot of opposition by restaurant owners and their likes. The Govt. then reduced it to 5%. I still recall, McDonald's and all similar outlets immediately increasing their prices to match the difference. So, in the end the consumer was still paying the same amount.
I am afraid this might repeat here also. The reasons for doing this, input cost, R&D costs will be cited and no real benefit is likely to trickle in the market.
Considering EV is still a relatively new concept/product expecting the prices to fall and come on par with ICE powered cars could be a.wishful thinking. My worry is on one hand Govt. reducing GST in EVs and then increasing the cost for electricity, especially when you start crossing the higher usage slabs.

Only time will tell if this is a good move.

The restaurant comparison is not fair. While the rate was reduced to 5%, they were not allowed to take input credit. So, in effect, the GST rate was still much higher than 5%

Honestly, for EVs, there is no need for a rate cut. All the EVs have huge waiting periods. This means that there is no need for a financial incentive.

[sunilsreenivasg]

Originally Posted by SKC-auto

Gadkari says this few days back.

"I am trying...within one year, the cost of electric vehicles will be equivalent to the cost of petrol vehicles in the country and we will save money spent on fossil fuels,"

I thought that they are going to increase the cost of petrol vehicles to match

When everything is going up, I don't see a possibility of something coming down

[SKC-auto]

Originally Posted by sunilsreenivasg

I thought that they are going to increase the cost of petrol vehicles to match

When everything is going up, I don't see a possibility of something coming down

Agree, but also the prices of batteries and renewable energy are falling due to tech improvements. We may soon see batteries at 50$/kwh, EVs costing 2 lakhs more than equivalent ICE car should not be a problem with most people.

Gadkari's statement intrigued me, how can he be so sure that the ICE and EV car prices will be same in an year.