China changed its consumption tax treatment of batteries on September 1, 2026, ending a policy that has been in effect for over a decade. As the State Council Information Office announced, China will gradually introduce a tax on several battery categories that were previously exempt or subject to different treatment. The changes are intended to align taxation with developments in the battery industry while encouraging resource conservation, environmental protection, and technological upgrades.

Key Tax Changes for the Battery Industry

Under the new rules, mercury-free primary batteries, nickel-metal hydride batteries, lithium primary batteries, lithium-ion batteries, and all-vanadium redox flow batteries will be subject to a 2% consumption tax from September 2026, increasing to 4% from September 2027. Photovoltaic cells will also become subject to consumption tax, at 2% from April 2027 and 4% from April 2028.

At the same time, China is providing temporary tax exemptions for newer technologies. Sodium-ion batteries, solid-state batteries, fuel cells, and advanced photovoltaic technologies such as perovskite, tandem, and gallium arsenide cells will remain exempt from consumption tax from September 2026 through December 2028.

The policy represents a shift from China's existing framework, under which batteries have generally been subject to a 4% consumption tax since February 2015, with several categories, including lithium-ion batteries and solar cells, benefiting from exemptions. The phased approach is designed to introduce taxation gradually while protecting and encouraging emerging technologies.

The tax change is likely to squeeze margins on established battery technologies, giving manufacturers an incentive to shift R&D toward exempt, next-generation chemistries. The policy also aligns with China's broader carbon neutrality goals. Furthermore, the targeted taxation architecture reinforces China’s global climate commitments and overarching industrial roadmap toward carbon neutrality. 

Conclusion

This policy shift reflects a strategic balancing act by China, gradually applying consumption taxes to established battery technologies to modernize its tax framework, while simultaneously fostering innovation by shielding emerging, greener technologies with temporary exemptions. The phased approach is designed to introduce taxation gradually while protecting and encouraging emerging technologies.