India’s Solar Industry Needs Clarity

August 6, 2018 Taxation in India

Solar power in IndiaNEW DELHI – The solar industry in India is crying out for clarity on what GST rate applies to them.

Last week the Solar Power Developers Association (SPDA) of India petitioned the government to clear up the current legislative ambiguity regarding the taxation of equipment used in the generation of solar energy.

Currently, there is a concessional GST rate of 5 percent applied to the sale of solar power generating systems in India.

However, the term solar power generating systems is not defined anywhere in the legislature of India, meaning that while the concessionary rate exists, there is no clear understanding on what it applies to.

Advocates for the solar industry claim that many projects and initiatives were launched and operated on the premise of a 5 percent rate of GST, and that an 18 percent rate would not only make some projects unviable but would also compromise the national target for 100 gigawatts of power generation by 2022.

The call for clarity is spurred on by disparities between Authority for Advance Rulings (AAR), where some projects in some regions enjoy the 5 percent rate, while other projects will face the more punitive 18 percent.