India’s clean energy transition and the development of a circular economy have become key priorities for startups in the country. In a bid to accelerate these efforts, battery recycling startup Lohum is urging the government to reduce the goods and services tax (GST) on waste lithium-ion batteries from 18% to 5% in the upcoming budget.
Rajat Verma, CEO and founder of Lohum Cleantech, highlights the existing 5% GST on waste lead acid batteries, which fall under e-waste. Verma argues that lithium-ion batteries should also be included in the same category and taxed at the lower rate of 5%. Similarly, Akshit Bansal, CEO and founder of charge point operator Statiq, emphasizes the importance of circular economy measures in the budget, promoting recycling, waste reduction, and the use of eco-friendly materials in manufacturing.
Verma further calls for a reduction in the GST on processed ores of nickel and cobalt from 18% to 5%. He explains that the pre-2021 GST rate on these materials was 5%, and the increase to 18% was intended to address the inverted duty structure in the mining industry. However, since India has no reserves of nickel and cobalt, Verma argues that the current rate serves no purpose and should be revoked back to 5%. He also suggests a decrease in the custom duty on cobalt and nickel ores and concentrates from 2.5% to 0%.
India heavily relies on China for critical rare earth minerals like cobalt, lithium, and nickel. Lohum aims to address this dependence by producing these materials through recycling and converting them into battery-grade. Verma notes that these materials are geostrategic in nature and limited to certain geographies, with China dominating their manufacturing.
In last year’s Union Budget, the Indian government provided a significant stimulus of ₹35,000 crore for the country’s energy transition. Verma points out various measures that supported clean energy and sustainable growth, including capital investment for energy transition, inter-state grid integration, funding for battery energy storage systems, and indirect tax revisions favoring green energy.
To support the adoption of electric vehicles (EVs), Verma calls for a reduction in the GST on lithium-ion batteries from the current 18% to 5%. He highlights the inverted duty structure created by the 5% GST on EVs, making the higher rate on batteries problematic. Bansal echoes this sentiment and emphasizes the importance of extending the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles (FAME) scheme beyond its current schedule until March. He believes that FAME III will be crucial for maintaining price parity between EVs and internal combustion engine vehicles, driving sustained EV adoption.
Verma also expects the extension of the FAME scheme to FAME 3, along with a comprehensive scheme for manufacturing, refining, recycling, and midstream processing of critical materials.
In conclusion, startups like Lohum and Statiq are calling on the Indian government to reduce the GST on waste lithium-ion batteries and processed ores of nickel and cobalt to 5% in the upcoming budget. They emphasize the need for circular economy measures, extension of the FAME scheme, and comprehensive support for the manufacturing and recycling of critical materials. These steps are crucial for accelerating India’s clean energy transition, reducing dependence on China for rare earth minerals, and building a sustainable future.
