Withdraw the Increment in GST on solar & renewable energy products from 5% to 12%

The GST council has increased GST on solar & renewable energy products from 5% to 12% w.e.f. 1st October 2021.

Some of the immediate consequences are :

a) It may be good for manufacturers, as it corrects an inverted duty structure that they face, but not so great for downstream EPC ecosystem and developers, who will now face an inverted duty structure. The output duty on solar EPC contract for eg., is 8.9% and it does not help if all inputs are tax at 12%. Situation gets worse for developers where the output does not come under GST (electricity).

b) To be fair, this also increases the IGST component on imported solar modules. Imported modules which currently suffer NIL BCD + NIL SGD + 5% IGST , will now go into a NIL BCD + NIL SGD + 12% IGST. This will increase the total incident import duty from 5% to 12%. This, in a way, makes up for the lapse of SGD and the failed attempt to impose a compensating anti dumping duty which has been mired in courts. Is the Government hiking GST to compensate for the stalled Anti-dumping duty? There is a strong probability here of that happening.

c) Now with the hiked rates, compounded with the 40% BCD which will kick in from April 2022, the net incidence on imported modules post April 22, will rise from 51.2% to ~61.28% .

We have begun to tax solar modules like we tax cars!.

Increases in GST on modules do not get passed on, as the entire value chain of RE generation is not under GST. GST’s design mitigates the cascading impact of tax only when GST spans the entire value chain. With the final product viz., Electricity outside GST, this increased GST, will lie in the books of developers/EPC contractors accumulated and un-utilised. As usual government bids will get protection under change of law. It is the private supply of solar modules for open access, rooftops for residential and C&I which will bear the brunt.

At the end of the day, it results in higher power costs for the end consumer.

It is time we brought Electricity also under GST to mitigate the cascading impact of high tax rates. That will be a small compensation.

But this will be finally impacting the power cost to consumers and another blow to Rooftop solar system!!!

So, REEPA (Renewable Energy Entrepreneurs and Professionals Association) trust strongly recommends GST Council to withdraw this increase immediately.

Petition Started By REEPA

REEPA(Renewable Energy Entrepreneurs and Professionals Association)    Contact the author of the petition