Uncertainty regarding the applicable rate of GST on various solar PV contracting structures likely to constrain India’s progress toward its ambitious 100 GW solar target
The introduction of Goods and Services Tax (GST) has led to an increase in the cost of solar photovoltaic (PV) power generation by almost 6 per cent, reveals an independent study by the Council on Energy, Environment and Water (CEEW) and the International Institute for Sustainable Development (IISD).
However, GST has resulted in a decline in the cost of thermal power generation by 1.6 per cent.
Abhinav Soman, CEEW Programme Associate and study lead author, noted that the uncertainty surrounding the GST rates for various solar PV contracting structures and the imposition of safeguard duty may constrain India’s progress toward its ambitious target of 100 GW (gigawatt) of installed solar capacity through delayed investments by delaying investments.
He wants the policymakers to evaluate such impacts and their influence on the choices of energy sources.
18 per cent GST on supply of services ‘unfair’
The GST Council recently clarified that 70 per cent of the solar PV contract value will attract 5 per cent GST while the remaining 30 per cent will be treated as ‘supply of services’ and attract 18 per cent GST.
However, Neil McCulloch, IISD Associate and co-author of the study, said that services constitute a much smaller share of the contract value for most of India’s recent projects and so a higher tax burden is being unfairly imposed on such projects.