GST On Electric Car Batteries Could Come Down Drastically

GST on electric car batteries could be reduced from 28 per cent to 12 per cent as per a proposal that has been put forward by the Government. That could result in a drop in electric car prices in India.

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GST on electric car batteries could go from 28 to 12 per cent

Highlights

  • GST on electric car batteries to go from 28 to 12 per cent
  • Electric cars made in India will become much cheaper post this move
  • Swappable battery packs could become more popular for commercial use

The Ministry Of Road Transport has brought about a whole range of proposals to increase the adoption of electric vehicles in India. These include green number plates for electric vehicles, the proposal of scrapping permits to run commercial electric vehicles, allowing youth between the ages of 16-18 to ride electric scooters without a license and preferential parking for electric cars in certain areas. Another proposal that will help boost the adoption of electric cars by lowering cost of the batteries that go into the electric cars. The current GST rate on these batteries is 28 per cent but according to these proposals, the GST rates could be corrected and dropped down to 12 per cent - the same as the GST on electric cars. Currently, Mahindra and Tata Motors make electric cars in India and this move will help bring down manufacturing costs. 

electric cars green number plate

(Electric cars in India will become cheaper due to lower GST rate on batteries)

Not only will this help boost the manufacture and assembly of electric cars in India by bringing down the cost of most important component in an electric car, it will also help other support systems for electric cars. One of these, the concept of swappable battery packs could greatly be boosted by dropping the cost of electric car (or commercial vehicle) batteries. These batteries are still mainly imported from the likes of China or the United States by automakers who make electric cars in India. The prices of completely imported electric cars though might not be affected. That said, currently in India, there is no CBU electric car available on the market today.

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(Cheaper batteries will help in systems like 'swappable batteries' for electric commercial vehicles)

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As we mentioned, the electric battery is the most expensive part of any electric vehicle. Electric battery costs are calculated in the '$ per kWh' unit and as of 2018 the cost per kWh of electric car batteries is between $225-$250. Comparatively, the cost per kWh of electric car batteries in 2010 was a staggering $1000! With costs coming down considerably, the cost of electric car batteries is expected to drop below the $100 point by 2026 (according to a study by Bloomberg) triggering a huge reduction in electric car prices. For India to mass adopt electric cars, they need to be the same price as their internal combustion equivalents and this move will only come into play once taxes on electric cars and more importantly components are made lower.

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