The Union Budget 2025-26 has introduced substantial tax exemptions to drive the production of lithium batteries and related sectors, aiming to strengthen domestic manufacturing, reduce import dependence, and make electric vehicles (EVs) and electronics more affordable.

In a major policy move, the government has eliminated the Basic Customs Duty (BCD) on crucial materials such as cobalt, lithium-ion battery scrap, lead, zinc, and 12 other critical minerals. These materials are essential for manufacturing batteries, semiconductors, and renewable energy equipment. By removing these duties, industries reliant on these resources—such as EVs, clean energy, and electronics manufacturing—are expected to benefit from significantly lower production costs.

Maulik Manakiwala, Partner, Indirect Tax, BDO India, stated, “The National Manufacturing Mission to support domestic clean tech manufacturing of EV batteries, solar PV cells, wind turbines, etc., is a step closer to moving from thermal to green energy. This also aligns with the government’s vision of Make in India and sustainable future solutions like green manufacturing and Electric Vehicles (EVs).”

Additionally, 35 new items used in EV battery production and 28 items for mobile phone battery manufacturing have been made duty-free. This provision allows companies to import essential machinery and tools for battery production without additional taxation. The move is expected to accelerate local battery production, reduce reliance on imports, and encourage companies such as Tata, Ola Electric, and Reliance to expand their operations in India.

The initiative is set to make EV batteries more affordable, subsequently lowering the cost of electric vehicles. By slashing production expenses, the policy is expected to stimulate domestic manufacturing while reducing India’s dependence on China and other countries. This will bolster India’s clean energy sector and advance its renewable energy goals.

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Sachidanand Upadhyay, MD, Lord’s Mark Industries Limited, highlighted the broader impact, stating, “The National Manufacturing Mission announced in the Union Budget 2025 is a significant step towards bolstering India’s clean tech manufacturing ecosystem. By enhancing domestic production of EV batteries, solar PV modules, wind turbines, and grid-scale batteries, this initiative will reduce dependency on imports and strengthen India’s position in the global renewable energy supply chain. The move complements existing PLI schemes and will encourage backward integration, enabling Indian manufacturers to scale up operations efficiently.”

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