The final GST Slab for the Tax on Solar and Wind Energy Sectors to Be Determined Soon

The companies working in the renewable sector of India are facing a fix as the slab of the tax may come under the regime of GST (Goods and Service Tax).

At the moment, the tax rate on solar energy that is generated from imported panels is at the rate of nearly 1.5 percent and on the other hand the rate of tax on the wind energy that is generated from imported panels is at a rate of 8.5 percent.

The partner of Indirect Tax at KPMG India, Harpreet Singh said that the government is planning to put both the renewable energy sources of India – wind as well as solar energy under the tax slab of 5 percent so that the usage and the demand of both these renewable sources of energy is balanced and the higher rate of tax of the wind energy does not inhibit or decrease its profits or gains along with the usage.

MNRE (Ministry of New and Renewable Energy) has suggested that the both solar as well as wind energy must have a zero rate of tax as this will motivate several vendors to provide the services along with the goods at a negligible rate of GST and it is going to become eligible for the input credits on the services that are used as well as the capital goods.

MNRE also said that according to the PPAs (power purchase agreements) that are signed by the developers of energy projects, any transformation that will be made to the tax incidence overall will be passed to the respective consumers.

The slab of zero tax will be extremely fruitful for the wind energy sector; however, as far as solar energy is concerned, this zero tax rate will not be making any difference to it.

Chintan Shah, the Vice Chairman of the Indian Wind Turbine Manufacturers Association said that if the rate of zero tax slab is implemented, many wind energy companies will be able to reduce their expenditure and tariffs by a rate of 25 paise for each unit.

The Chief Executive Officer of Ganges International, Mr. Vinay Goyal said that if the tax slab for solar energy is kept at a rate of 5 percent then there will be an effective increase of 10 paise for each unit. And if the tax slab is increased to a rate of 12 percent, then the cost of each unit will surge by 25 paise.

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