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China to Levy 2 Percent Consumption Tax on Batteries and Solar Cells

China has announced the levy of 2 percent consumption tax on lithium-ion batteries from September 1, which will be increased to 4 percent from September 1, 2027. A 2 percent tax on solar cells from April 1, 2027 has also been announced which will be raised to 4 percent from April 1, 2028.

July 18, 2026. By Mrinmoy Dey

China's Ministry of Finance, General Administration of Customs and State Taxation Administration have jointly announced adjustments to the country's battery consumption tax policy, introducing a phased consumption tax on a range of battery technologies and photovoltaic (PV) cells while extending tax exemptions to several next-generation energy storage and solar technologies.

According to the announcement, a 2 percent consumption tax will be imposed on mercury-free primary batteries, nickel-metal hydride (NiMH) batteries, lithium primary batteries, lithium-ion batteries and vanadium redox flow batteries from September 1, 2026. The tax rate will subsequently increase to 4 percent from September 1, 2027.

The authorities have also decided to extend the consumption tax regime to the solar manufacturing sector. A 2 percent consumption tax will be levied on photovoltaic (PV) cells, also referred to as solar cells, from April 1, 2027, with the rate rising to 4 percent from April 1, 2028.

At the same time, China has announced temporary tax incentives for emerging clean energy technologies. Sodium-ion batteries, solid-state batteries and fuel cells, along with perovskite solar cells, tandem solar cells and gallium arsenide photovoltaic cells, will be exempt from consumption tax from September 1, 2026, through December 31, 2028.

The policy adjustment is aimed at further improving China's consumption tax framework while differentiating between mature battery and solar technologies and emerging next-generation technologies.

The move is expected to increase raw material inputs for the Indian manufacturers who remain heavily dependent on Chinese imports. While the impact on the solar manufacturing front will be less, given that India is ramping up capacity and will have significant domestic capacity by April 2027, the battery segment will be impacted the most.

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