The rates for the solar power sector were originally pegged at 18 per cent. The government later clarified that all solar equipment and parts would attract 5 per cent GST only.

July 01, 2017

With the new Goods and Services Tax (GST) regime, touted as the biggest indirect tax reform, coming into effect, the domestic solar power industry is bracing for a marginal rise in project costs. Solar tariffs have witnessed a continuous decline in India over the past few years. With tariffs dropping as low as Rs. 2.44 per unit, solar tariffs have become cheaper than thermal power tariffs.

As per the industry people, the new GST rate of 5 per cent will have a marginal impact on manufacturing and maintenance of solar equipment and projects. There is expected to be a 4-5 per cent rise in project cost after the GST. That would not mean a significant impact in per unit cost. The new rate will also impact tariff by around 15-20 paise.

The industry also believes the 4- per cent impact on project cost will not create a significant dent. This level of impact would be easily absorbed by the ongoing decline in costs. Originally, the GST Council had finalized the new tax rates on May 21 pegging the rates for the solar power sector at 18 per cent. The government later clarified that all solar equipment and parts would attract 5 per cent GST only.