GST leads to 12% increase in solar project costs – AISIA

The association has filed a petition against the rise in tax on solar power equipment under the new regime.

While petitioning, AISIA General Secretary, Gyanesh Chaudhary mentioned in a letter to the Indian Revenue Secretary, Hasmukh Adhia, that the GST has led to a 10-12% rise in the overall cost of solar projects, which has resulted in higher power costs, the Indian Express reports.

GST rates for all balance of systems, modules and procurement set by the government vary; the lowest rate, 5%, applies to solar power generating systems.

According to AISIA, rather than recognizing them as a part of solar power generating system, individual items of equipment are also charged GST.

Solar modules used to be exempt from all duties in the pre-GST regime, however since July 1, 2017, they are taxed at 5%.

Previously, balance of systems equipment like inverters, cables and transformers were charged a 2% central sales tax, while excise duty was exempt, but, post-GST, they are charged 5-8%. The tax on services and civil work has similarly risen to 18%, from 15% and 6%, respectively.

“Currently, the power developers cannot avail the benefit of GST for the electricity produced leading to a detrimental effect towards achieving the 100 GW target of National Solar Mission,” Chaudhary wrote.

The association has urged the government to remove the ambiguity and suggested to re-introduce the MNRE-certification or self-certification supported by an undertaking. Moreover, there should be no GST on equipment, which is part and parcel of the solar generating system.