China will phase in adjustments to its consumption tax policy on batteries starting September 1, 2026, in a move that analysts say will better align the tax regime with the evolving dynamics of the country’s battery industry.
The Ministry of Finance, the General Administration of Customs, and the State Taxation Administration jointly issued the Announcement on Adjusting the Consumption Tax Policy for Certain Battery Products (Announcement No. 20 of 2026) on July 16, 2026, to further refine the consumption tax system.
Phased Tax Restoration for Major Battery Categories
Under the new rules, mercury-free primary batteries, nickel-metal hydride batteries, lithium primary batteries, lithium-ion batteries, and all-vanadium redox flow batteries — which have been exempt from consumption tax since 2015 — will be subject to a 2 percent tax rate starting September 1, 2026. The rate will rise to 4 percent from September 1, 2027.
For photovoltaic (solar) cells, the tax will take effect later: a 2 percent rate will apply from April 1, 2027, increasing to 4 percent from April 1, 2028. The delayed implementation for solar cells is intended to accommodate the industry’s ongoing stabilization following efforts to address “involution-style” competition.
Tax Exemptions for Next-Generation Battery Technologies
Certain advanced battery technologies will enjoy a temporary exemption from consumption tax for a specified period. Sodium-ion batteries, solid-state batteries, fuel cells, and advanced photovoltaic types including perovskite cells, tandem cells, and gallium arsenide cells will remain tax-free from September 1, 2026, through December 31, 2028. This exemption is designed to incentivize innovation in emerging battery technologies.
Background and Policy Rationale
China has levied a 4 percent consumption tax on batteries since February 2015, with seven categories — including lithium primary, lithium-ion, and solar cells — previously exempted. The current adjustment ends an 11-year tax exemption for these product categories.
Analysts say the policy adjustment will help better leverage the regulatory role of consumption tax to promote resource conservation and environmental protection, while facilitating the healthy and high-quality development of the battery sector and driving technological progress and industrial upgrading. The phased approach — with a one-year buffer period at the 2 percent rate before returning to 4 percent — allows businesses time to adjust their operations and ensures smooth policy implementation.