There will be no reduction in the goods and services tax (GST) rate on electric vehicles (EV) batteries as the GST Council’s fitment committee has rejected the industry’s proposal, sources told CNBC-TV18.

The EV industry had sought a reduction of GST on batteries from 18% to 5%, however, the fitment committee has recommended maintaining a status quo on the rate.

GST Council’s fitment committee, which comprises revenue officials from both the Centre and states, is of the view that Lithium-ion batteries have multiple uses that is, in cellular mobile phones, portable electronics, and electric vehicles etc, sources said.

It must be noted that built-up EVs are subject to a 5% GST, but lithium-ion batteries are subject to an 18% GST and charging stations are charged GST at 18%.

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The development comes days after Union Minister Nitin Gadkari, at a SIAM event, asked the auto industry why buses and trucks can't run on ethanol and complimented them for increasing focus on alternate fuels and electric vehicles.

"Seven years ago, I told companies to transition to electric vehicles, those who haven't done so have seen a drop in market share today. Appropriate decision and timing are very important for the auto industry," he said.

Meanwhile, Secretary of the Ministry of Heavy Industries Kamran Rizvi, also told CNBC-TV18 that the government had not yet decided on the rollout of FAME III and that it was too early to comment on the impact of the decreased subsidy scheme for EVs.

The Ministry of Heavy Industries, in its recent notification, announced a modification in the FAME II (Faster Adoption and Manufacturing of (Hybrid &) Electric Vehicles in India) II scheme and dropped the subsidy on electric two-wheelers to Rs 10,000 per kWh from the existing Rs 15,000 per kWh and the maximum subsidy cap from 40% to 15%.

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(Edited by : Amrita)