The renewable energy sector is quite content with GST provisions. Contrary to earlier fears of sale of solar equipment – panels, modules and inverters – being taxed at high rates, the GST on such sales has been set at 5 per cent.
“The net effect on solar projects will be 3.5-4.5 per cent,” said Raj Prabhu, co-founder and CEO of Mercom Capital Group, which tracks the segment. “There will be issues with power purchase agreements as they will vary from state to state but 5 per cent GST is much more palatable than the expected 18 per cent.”
Similarly, in wind segment, sale of turbines and other equipment will attract GST of 5 per cent, the same as VAT did earlier. However, most wind equipment manufacturers also take on the task of setting up projects for developers, and this being a service, will attract 18 per cent GST, up from 12 per cent tax on engineering services earlier. “All engineering services are currently in 18 per cent bracket,” said D V Giri, secretary general, Indian Wind Turbine Manufacturers Association.
Solar projects involving civil and works contracts will be taxed at 18 per cent.