India stands at a critical juncture in its electric vehicle revolution. As we approach the crucial GST Council meeting, the government has an opportunity to correct some fundamental policy inconsistencies that threaten to undermine one of the most promising pathways to mass EV adoption.
Electric vehicles are charged a GST rate of 5 per cent , while the standalone batteries attract a GST rate of 18 per cent . This creates an inverted duty structure. It adds to the cost for charging and swapping players leading to an accumulation of unutilised Input Tax Credit (ITC) and potentially, working capital blockage.
While the electric vehicles are charged a GST of 5 per cent , the chargers are charged a GST of 5 per cent , battery swapping and charging services attract a levy of 18 per cent since they are classified as “maintenance and repair” services.
Swapping or charging electric vehicle batteries fundamentally involves the transfer or purchase of energy, similar to buying electricity. Applying an 18 per cent GST on this process overlooks its nature as a utility service, leading to disproportionate taxation. By taxing it so heavily, we’re making it harder for adoption of electric vehicles and innovative business models such as battery swapping to succeed.
The Looming ICE Vehicle Challenge
The current GST reform proposals add urgency to this issue. The Group of Ministers on rate rationalisation has accepted the Centre’s proposal to reduce GST on small ICE vehicles from 28 per cent to 18 per cent . While this may stimulate overall auto demand, it threatens to eliminate the price advantage that has driven EV adoption in India.
HSBC’s analysis warns that “EV players will face a disadvantage if taxes are reduced on ICE vehicles,” potentially slowing the sector’s growth momentum.
Challenges to the Attractiveness of Electric Vehicles
EVs have become a lifeline for millions of common gig workers and three-wheeler drivers across India, enabling them to earn a viable living with lower operating costs and cleaner energy. Battery swapping technology further enhances this by delivering swift, under-two-minute exchanges, drastically reducing downtime, and cutting upfront vehicle costs by up to 40 per cent , thereby making EVs more accessible to the middle class and commercial fleets.
However, the imposition of an 18 per cent GST on battery charging and swapping services adds an estimated 13 per cent extra cost on the energy consumed, directly impacting the earnings of these workers. For example, a three-wheeler driver who spends around ₹6,000 monthly for energy incurs an additional ₹780 due to GST, totalling almost ₹10,000 in annual fuel costs.
Further, a 3-wheeler or 4-wheeler commercial delivery driver purchasing a replacement lithium-ion battery faces an additional ₹15,000 in GST equivalent to 13 per cent of battery cost. For electric bus operators, this translates to ₹2 lakh to ₹3 lakh in additional costs per battery.
These extra burdens threaten to undermine EV adoption precisely where it is most needed.
Global Best Practices Versus Indian Reality
Globally, leading EV markets seem to have figured out the right approach already. China treats vehicles with batteries and standalone batteries exactly the same for tax purposes, and EVs account for over 50 per cent of all auto sales in the country now. Taiwan’s Gogoro network dominates their electric scooter market partly because they have consistent tax rates. Even European countries are moving toward uniform tax treatment for all EV infrastructure.
The lesson is clear: when governments treat all forms of electrification equally, the market responds positively.
India’s approach has so far not been consistent. While a previous GST Council meeting clarified that “electric vehicles, whether or not fitted with a battery pack, are eligible for the concessional GST rate of 5 per cent ,” standalone batteries and swapping services continue to attract the higher 18 per cent rate. From NITI Aayog’s draft battery swapping policy to FICCI’s industry submissions, the message has been consistent: align GST rates between EVs and their components. Discriminatory taxation makes little sense; the same technology should not face higher levies simply because of a different business model.
Bringing GST on batteries charging and swapping down to 5 per cent , at par with EVs, would have minimal revenue impact but significant benefits. Industry estimates show this step alone could accelerate EV adoption by 15–20 per cent while creating thousands of jobs in the charging and swapping ecosystem.
A Policy Framework for the Future
We urge the government to implement a comprehensive solution:
- First, reclassify battery swapping and charging services. Remove both of them from the 18 per cent “repair services” category, recognising it as an energy service essential to the EV ecosystem.
- Second, achieve tax parity. Reduce GST on standalone lithium-ion batteries from 18 per cent to 5 per cent , aligning with the rate on EVs. This removes the current penalty on replacement batteries and spare parts.
- Third, maintain EV advantages. If ICE vehicle GST rates are reduced to 18 per cent , ensure that the combined tax burden on EVs (including batteries and services) remains significantly lower to preserve incentives for clean mobility.
The Moment of Truth
India, now the world’s third-largest auto market and the fastest-growing EV market, has shown what’s possible when policy supports innovation, especially in two- and three-wheelers. Battery swapping and charging can build on this success by creating millions of jobs, from station operators to technicians and delivery partners, while making EVs affordable and practical without overhauling urban infrastructure.
Finally, before making any tax changes to vehicles, the government should consider how they’ll affect oil imports and our trade balance. Every policy should be evaluated on whether it helps or hurts our energy independence goals. The situation gets more complicated and obvious when you consider the recent developments in geopolitics. Transportation uses up 75 per cent of all the petrol consumed in India. So, if we can get more people driving electric vehicles, we can seriously cut down on these oil imports.
What we seek is simple: a level playing field where tax policies reward innovation instead of penalising it, ensuring India leads the global battery swapping revolution.
