On Monday, Union Finance Ministry clarified that electric vehicles with or without batteries would be taxed at a flat rate of 5%.

Back in June, at the 47th meeting of the GST council chaired by Union Finance Minister Nirmala Sitharaman, the government lowered the tax on lithium-ion batteries from 18% to 5%, the lowest rate.

“Electric vehicles, with or without battery packs, are eligible for the 5% GST rate,” read the ministry. In early 2018, the government lowered the GST of EV battery packs from 28% to 18%.

According to a study by Arthur D Little, EV adoption in passenger cars could be as low as 10% by 2030, accounting for only 5% of total EV sales.

The study, titled “Unlocking India’s Electric Vehicle Potential,” states that to achieve more than 30% EV adoption, India will need around 800 GWh of batteries by 2030.

To meet this growing demand, India is accelerating plans to produce lithium-ion batteries domestically, which are expected to receive $2.3 billion in government subsidies and more than $7.5 billion in investment potential, it said.

On the investment front, foreign direct investment (FDI) inflows are approaching $6 billion in 2021. Also, India’s electric vehicle industry is likely to attract further foreign investment of around $20 billion by 2030 to drive the country’s economic growth and help achieve the scale required in the industry.