Indian solar industry continues to face uncertainty regarding Goods and Services Tax (GST), says consultancy Bridge to India. »We know that GST will be applied to solar modules at a concessional rate of 5 percent. Central government officials including the Minister for Power, Piyush Goyal, have confirmed on multiple occasions that the 5 percent concessional rate will extend to all equipment for solar power generating plants. But operational clarity for these other capital goods used in solar projects is lacking in practice.«

Talking to four inverter suppliers, two of them said to Bridge to India that the GST rate for inverters is 18 percent, one said that it is 5 percent and another one said that that it is 5 percent for end-users and 18 percent for EPC companies. As a reason for the rate confusion the consultancy identified that it is not clear how to avail of the concessional 5 percent GST rate when many of the same components are taxed at higher rates for use in other industries: »For example, transformers used for solar projects are intended to be taxed at 5 percent but they are taxed at 18 percent for other applications.« GST rate varies from 18 percent for capital goods such as inverters and module mounting structures to 28 percent for cables and batteries.

Almost 10 GW of India’s pipeline solar capacity is impacted by increase in indirect tax rates under GST and lack of clarity adds to the complexity. Net increase in project EPC costs is expected to be around 6 percent if the issue is not resolved by the Ministry of Finance and the Ministry of New and Renewable Energy.