India: Only 5% GST on solar modules instead of 18%

India: Only 5% GST on solar modules instead of 18%

The solar industry is relieved by the recent likely decision of the GST council in India to levy only 5% tax on solar panels instead of 18% proposed earlier. This could mean only a marginal rise in solar power projects costs.
India is planning on a new Goods and Service Tax (GST) and has recently disclosed more details about it. As were reported a few days ago, according to this last announcement, solar modules were to be taxed with 18%. This left the entire industry baffled, as the tax for modules used to be 0% and coal was assigned a much lower taxation.


Recent news indicates only 5% tax on solar modules

Analysts were discussing the possible reasons for the government’s decision. It is assumed that the successful growth of the solar sector suggested to the authorities in charge that no further funding or support is required. However, it seems like the government has now backtracked when it comes to these plans, probably based upon the uproar that was caused.
Referring to Indian State Secretary in the Ministry of Finance Hasmukh Adhia, Bridge to India, the leading consultancy and knowledge services provider in the Indian renewable market, is expecting a taxation of about 5%.


Tax increase was strongly criticised

Not only members of the industry themselves, but also the Indian Ministry of New and Renewable Energy (MNRE) strongly criticised a possible tax increase as this might influence the solar sector negatively. Ultimately, Bridge to India said: “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.”


Confirmation of tax pending

While these assumptions are made, the final tax amount would be to be confirmed on GST council meet to be held by the beggining of June, about one month before the start of the new GST. The meeting is eagerly awaited by the entire industry, as it is only then that the final GST amount for solar modules will be announced.