The goods and services tax (GST) Council is likely to clarify on the tax rate applicable to solar modules at its next meeting in early June, which might reverse a decision to set an 18 percent rate on the key component of solar energy infrastructure.
Under the final GST rates, which takes effect on 1 July, solar modules have been classified under an 18 percent tax slab; the present effective tax rate on them is zero.
The ministry of new and renewable energy (MNRE) has informally communicated to the sector that this might be an anomaly and that a clarification is likely to be issued when the GST Council meets on 3 June.
The clarification could likely set the tax rate on solar modules at 5 percent—similar to that on the wind sector. Solar modules make up for about 60 percent of a solar project’s overall cost and eight out of 10 top module suppliers in the Indian market are from China.
New tax rates would hit more than 10 gigawatt (GW) of ongoing utility scale projects and pose a threat to their viability, clean energy-focused consulting firm Bridge To India said in a 22 May report.
India has 12.28GW of grid-connected solar power installed and it is expected to be the third largest solar market in 2017 with total capacity touching 18GW. India has a target of setting up 100GW of solar capacity by 2022. Solar power tariffs have fallen by about 25 percent in the past three months, raising questions on the viability of the projects.
By Baishakhi Dutta
