Why GST Parity on Battery Swapping is Essential

Arun Sreyas
12 Nov 2023
08:14 PM
2 Min Read

Battery swapping significantly reduces the initial vehicle cost by approximately 40-50%.

guest article race energy arun sreyas mobility outlook

In the evolving urban transportation landscape, electric vehicles (EVs) have swiftly emerged as the present and future of sustainable mobility, with battery technology playing a pivotal role. An intriguing facet of the EV ecosystem is battery swapping, a concept with immense potential to change the way we perceive electric transportation. This novel approach presents multiple benefits that are revolutionising the ease of an electric vehicle's use through a seamless swapping process that eliminates long charging durations and tackles range anxiety. This enhances EV scalability for commercial operators and reduces the need for extensive charging infrastructure, particularly in regions with limited facilities.

The Goods and Services Tax (GST) Conundrum and its Implications

Currently, EVs with a fixed battery system sold together are taxed at a nominal 5%. On the other hand, vehicles employed with battery swapping technology (where the batteries are sold separately) carry an 18% GST. The battery swapping provider is then forced to recover these additional expenses, often at the cost of the consumer.

This GST dichotomy casts a notable impact. Even with a high GST rate, the battery swapping industry has shown a significant growth rate in the B2B space. Passenger e-autos and e-rickshaws predominantly prefer a swapping system. Now, e-rickshaws are switching from fixed battery to swappable battery systems at a rate of around 10,000 vehicles a month. The 2-wheelers used for e-commerce and food/grocery deliveries prefer a swapping solution. Such staggering rates are being achieved while there is still a high GST rate.

Economic Parity Unleashes Possibilities

Imagine a scenario where this GST discrepancy is reduced to 5%. Such a change would unleash a host of possibilities. This would benefit the burgeoning market of Business-to-Business (B2B) customers, including the delivery and commercial transport ecosystem. A substantial 13% reduction in GST would not only make battery swapping more cost-effective for customers but also amplify the advantages associated with this game-changing technology. Already presenting a Total Cost of Ownership advantage for B2B customers when compared to fixed battery charging, battery swapping would witness an even more promising landscape with the attainment of a 13% reduction in GST.

Empowering Local Economies and Entrepreneurship

Battery swapping networks often thrive through partnerships with franchisees who shoulder the cost of batteries. However, the current 18% GST rate on batteries impedes the growth of local and small-scale businesses that could facilitate the expansion of battery swapping infrastructure. By lowering the GST rate, governments can stimulate entrepreneurship, promote employment, and elevate the overall livelihood of local communities.

India has targeted to achieve 80% EV penetration of two and three-wheelers by 2030. However, for India to achieve this level, the importance of GST parity for battery swapping cannot be underestimated. By recognising the economic, environmental, and societal benefits that come with reduced rates, we can collectively drive the transition to efficient electric transportation. This is not merely a call for change; it is an opportunity to propel India's economy forward and empower the industry for years to come.

Arun Sreyas is the Co-Founder of RACE Energy. Views expressed are personal. 

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