Indian project developers are worried about rising of taxes for solar products

The Indian Goods and Service Tax (GST) Council recommended to raise GST from 5 percent to 12 percent with effect from October 1, 2021, according to Mercom India. Solar project developers are worried about its impact on solar components and project costs. Rising GST could make solar projects unviable. The GST rate on solar modules was set at 5 percent in 2018.
This is a significant increase and will impact both the ongoing and upcoming projects. Utility-scale projects will be the most affected, says the consultancy, citing a manager of a solar company. He said that these projects’ power purchase agreement tariffs would have to be increased to accommodate the new tax structure. »Due to the inverted duty structure, wherein there is no GST levied on the sale of power, the GST paid for the renewables project would become a cost.«
Under the earlier tax structure, the GST component of the project cost was 8.9 percent, which will now be increased to 13.8 percent. Over one GW of projects across the rooftop and open access segments will be adversely affected. Furthermore, an increase in GST to 12 percent also affects raw materials including copper, aluminum and lead as well as steel and more, which are needed to manufacture solar an battery components.

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