Consumption Tax Introduced on Lithium-Ion Batteries and Solar Cells

Summary 

• China will levy a 2% consumption tax on a range of previously exempt battery products — including lithium-ion, lithium primary, mercury-free, nickel-metal-hydride and vanadium redox-flow batteries — from 1 September 2026, rising to 4% from 1 September 2027; photovoltaic (solar) cells become taxable at 2% from 1 April 2027 and 4% from 1 April 2028. 

• Next-generation technologies are favoured: sodium-ion batteries, solid-state batteries, fuel cells and advanced PV cells (perovskite, tandem, gallium-arsenide) are temporarily exempt from 1 September 2026 through 31 December 2028, subject to meeting national standards and providing qualifying test reports. 

• The measure ends an 11-year exemption in place since 2015; taxpayers may credit consumption tax paid on battery inputs, self-produced batteries used in continuous production are not taxed, and exports remain outside scope — this is separate from the battery export VAT-rebate cut (9%→6% from April 2026; abolished January 2027). 

Extended article 

On 16 July 2026, China’s Ministry of Finance, together with the General Administration of Customs and the State Taxation Administration, issued Announcement No. 20 of 2026, restructuring the consumption tax treatment of battery and photovoltaic products. The announcement ends a long-standing exemption — in place since 2015 — under which lithium-ion batteries, solar cells, fuel cells and lithium primary batteries were carved out of the 4% consumption tax that otherwise applied to batteries. 

Under the new schedule, covered batteries — mercury-free primary batteries, nickel-metal-hydride batteries, lithium primary batteries, lithium-ion rechargeable batteries and all-vanadium redox-flow batteries — are taxed at 2% from 1 September 2026, rising to 4% from 1 September 2027. Photovoltaic cells follow a parallel path, becoming taxable at 2% from 1 April 2027 and 4% from 1 April 2028. The tax applies to the factory-gate value of cells and packs sold by manufacturers, so its cost impact compounds along the supply chain even though the headline rate is modest. 

A deliberate policy tilt favours emerging chemistries. Sodium-ion batteries, solid-state batteries, fuel cells and advanced photovoltaic types (perovskite, tandem and gallium-arsenide cells) remain exempt from 1 September 2026 through 31 December 2028. The exemption is not automatic: a product must meet the applicable national standard and, before its first exemption filing, the taxpayer must obtain a test report from a qualified inspection body. To avoid cascading, taxpayers may credit consumption tax previously paid on battery inputs used to manufacture taxable batteries, and self-produced taxable batteries used in the continuous production of other taxable batteries are not themselves taxed. Exports are outside scope, consistent with the general design of Chinese consumption tax. 

Businesses should note that this consumption-tax reform is distinct from China’s separate tightening of the battery export VAT rebate (reduced from 9% to 6% on 1 April 2026 and abolished from 1 January 2027). Read together, the two measures signal a coordinated effort to curb overcapacity, reduce indirect export subsidies and steer investment toward higher-value, next-generation battery technologies — while adding a new domestic cost line that manufacturers, EV makers and energy-storage integrators will need to model into 2027 pricing. 

Sources: MOF Announcement No. 20/2026  ·  State Council (SCIO)  ·  Reuters  ·  CnEVPost

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