Gung-ho about solar energy? Here’s how GST set to hike solar tariffs nearly 10%

Though the forthcoming goods and services tax (GST) regime might add more jobs in the solar power sector, it may also raise solar tariff by 9.5%, a study released on Tuesday by the Council on Energy, Environment and Water (CEEW) revealed.

The report said GST runs the risk of raising a number of taxes, leading to a hike in final solar power prices. Simultaneously, it might also lower prices of domestic solar modules while making their imported counterparts costlier, thus providing financial stimulus to manufacture solar equipment in the country.

The report said taxes on preliminary expenses and civil works may rise to 18% from current rate of 15% after GST. Panels, which constitute about 62% of the manufacturing costs, might be taxed at 17% from current rate of 5% under unfavourable GST calculations. Additionally, increase in tariffs would be higher for the states which provide VAT and entry tax exemptions for solar equipment.

As there are no clear guidelines regarding the applicable GST slab for solar power projects, the estimates were based taking into account the best and worst case scenarios. Lack of clarity has already forced small solar developers to opt out of participating in ongoing bidding processes and tenders.

The report further said under amicable GST circumstances, the process of claiming duty-exemptions on solar equipment production would be simplified. It added that solar power projects in India are likely to create 1 million jobs by 2022 to achieve 100 GW of installed solar capacity.