Solar modules to be taxed at 5% under GST as against 18% declared earlier

29.05.2017

Last week, we wrote that the proposed 18% Goods and Service Tax (GST) on solar modules could cause major disruption in the industry and affect over 10 GW of projects. Following uproar in the industry, India’s revenue secretary, Hasmukh Adhia, has clarified that the rate of tax on solar modules should be 5% and not 18%. He said that an official clarification in this regard may be issued on June 3 when the GST council meets next. Earlier last week, secretary for Ministry of New and Renewable Energy (MNRE) had also issued a statement that the 18% rate on solar modules seems to be an anomaly and that it should be corrected.

5% GST rate for solar modules sounds reasonable and consistent with government guidance leading up to the rates announcement. The new tax regime will result in effective rate of indirect taxes to go up from zero to 5% on solar modules and around 3% on engineering and construction services. Impact on inverters is still not clear. Our current estimate is that the total project capital cost will rise by about 4%.

BRIDGE TO INDIA believes that the revised rate structure will not have any material negative impact on the industry because of the buffer afforded by sharp fall in equipment costs. It will allow project developers to proceed with construction. Some developers may still file compensation claims but many of them might simply absorb the additional burden to avoid scrutiny of sensitive commercial information.

As we stated last week, MNRE needs to play a hands-on role by advising all affected entities – project developers, DISCOMs, equipment manufacturers and EPC contractors – to ensure smooth transition for the solar industry.

Bridge To India

Similar Entries

Kurnool solar park (pict. Greenko)

For the secure integration of solar parks on a gigawatt scale, grid operators need particularly accurate predictions of power generation. The German-based company energy & meteo systems is already forecasting the generation capacity of large parts of several gigawatt parks and has now also acquired operators of the world's second largest solar park Pavagada in India as customers.

Renewables covered around 52 percent of gross power consumed in Germany during the first quarter of 2020. This all-time high was driven by a combination of one-off events. Preliminary calculations by the Centre for Solar Energy and Hydrogen Research Baden-Württemberg (ZSW) and the German Federal Association of Energy and Water Management (BDEW) yielded this figure. February’s record winds were followed by an unusually sunny March. Power consumption was also down by one percent from the same period last year.

Global Energy Storage Systems Market is set to grow from its current market value of more than $340 billion to over $500 billion by 2025; according to a new research report by Global Market Insights, Inc.

According to the General Administrative Regulation (German: AVV) for the marking of aviation obstacles, infrared light will be mandatory for many wind turbines as additional navigation lighting. The infrared light developed for this purpose by former Reetec, now Robur Wind, has been certified by the responsible authorities.