In a relief to the electric vehicle (EV) industry, the union finance minister Nirmala Sitharaman on Saturday announced significant tax exemptions to promote the production of lithium batteries and related sectors, in her union budget 2025-26 address in the Parliament.
The significant move can be seen as the government’s effort to enhance local manufacturing and cut down the dependency on imports.
The materials which are vital for manufacturing batteries, semiconductors, and renewable energy equipment including cobalt, lithium-ion battery scrap, lead, zinc, and 12 other critical minerals have been exempted from the Basic Customs Duty (BCD).
This initiative is expected to result in cheaper EV batteries, making electric vehicles more affordable. It will also lower production costs, boosting domestic manufacturing. A stronger local industry will reduce dependence on China and other countries, supporting growth in clean energy and aiding India’s renewable energy goals.
Ayush Lohia, CEO, Lohia lauded the move by the government and said that the government’s initiatives to support MSMEs and boost manufacturing are a welcome move.
“The National Manufacturing Mission is a significant step towards furthering Make in India. Focus on clean tech manufacturing, particularly in areas like solar PV cells, EV batteries, and wind turbines, will help reduce India’s dependence on imports and promote sustainable development. The expanded fund-of-funds and Production Linked Incentive schemes will provide a much-needed boost to the sector. Overall, I believe the budget has taken significant steps towards promoting entrepreneurship, innovation, and sustainable growth,” Lohia said.
Hari Kiran, COO & Co-founder, eBikeGo said that the budget presents a promising future for the automotive sector, especially for MSMEs, by addressing critical pain points such as GST rates, import duties on components, and providing key incentives for electric vehicle adoption.
“The allocation for infrastructure development, particularly in roads and transportation, is bound to boost automotive demand. For MSMEs, which are at the heart of the component manufacturing ecosystem, the provisions for working capital support, technology upgradation, and easier credit access are vital. These measures will not only ensure the survival of these businesses but also drive their growth, fostering innovation and sustainability in the sector,” he added.
Meanwhile MD, Daewoo India, HS Bhatia said, “The exemption of lithium batteries from the Basic Custom Duty will give a fillip to the electric vehicle industry and encourage sustainable development.”
