New Delhi: With the Goods and Services Tax (GST) Council deciding to go ahead with a reduction of the tax rate on solar cells and windmill equipment, India’s
renewable energy sector is set to gain significantly. The Council recommended slashing the tax rate on the mentioned items from 5% from 12%.
Following renewable energy devices and parts for their manufacture will now be taxed 5 percent: Bio-gas plant, Solar power-based devices, Solar power generator, Wind mills, Wind Operated Electricity Generator (WOEG), Waste to energy plants / devices, Solar lantern / solar lamp, Ocean waves/tidal waves energy devices/plants, Photo voltaic cells, whether or not assembled in modules or made up into panels.
It is being estimated that the tax rationalisation would immensely impact the renewable energy sector.
Impact of GST Cut on Solar and Wind Power Projects
The Central Board of Indirect Taxes and Customs released a notification stating that the objective of the move is to promote renewable energy goods in the country.
“These goods already faced an inverted duty structure. While reducing the GST rate to 5% will deepen inversion, a mechanism for refund arising out of the inverted duty structure is available. In addition, process reforms will ensure expedited refunds,” it said.
Brokerage firm Nomura stated that the internal rates of return from renewable energy projects.
“This GST cut enhances the competitiveness of solar energy versus fossil fuels, accelerates rooftop solar adoption, and supports India’s renewable energy targets for 2030,” the brokerage mentioned.
The Union Finance Ministry said that the decision to reduce the GST rates on renewable energy products is aimed at promoting renewable energy goods and addressing structural issues like inverted duty structures.
Speaking to PTI, Rohit Chandra, CEO of OMC Power, opined that the low GST rates on renewable energy products will strengthen India’s transition toward sustainable energy.
“The reform paves the way for inclusive growth, rural empowerment, and sustainable energy solutions that will strengthen India’s economic and social fabric,” Chandra said.
Amit Paithankar, CEO & Whole-time Director, Waaree Energies Limited, said: “The reduction of GST on renewable energy devices and equipment will lower project costs and accelerate the capacity addition needed to meet India’s clean energy targets.”
