The Impact of GST on Renewable Energy


The Goods & Services Tax (GST) has been hailed as a clever initiative by most around the country, although, a number of implications are yet to be recognized. While it will diminish the cost of cars, processed food and cement; shopping online, eating out and traveling will take a little more out of your wallet. Moreover, the implementation will encourage the Digital India initiative owing to the policy that enterprises with a turnover exceeding 20 Lakhs will find a mandate to go digital.

This will increase the productivity of these enterprises in consequence.

While the aforementioned sounds interesting contemporarily, experts forecast that GST will minimally affect the renewable sector. Contrary to prior assumptions, the tax leveed on equipment for solar, wind and nuclear energy will be the lower slab of 5%. The taxation on solar panels is set to rise from zilch to 5% will resulting in a rise in the prices of solar panels.

The move will marginally increase the costs in these sectors, but it is unlikely to have a negative effect because if India’s attention on investing in the sector. The point of taxing the sector at all remains a point in moot, given the government’s repeated efforts to shift India’s faculties towards renewable power generation.

Wind energy will be subject to 5% GST which will be in terms with 5% VAT that was excised earlier. The service of setting up equipment which attracted a 12% tax will now be raised to an 18% GST. “All engineering services are currently in 18 per cent bracket. We have asked for the entire gamut to be brought into 5 per cent slab.”

said D V Giri, secretary general, Indian Wind Turbine Manufacturers Association.  With the global shift towards renewable energies, Indian enterprises like KCT Group have undertaken to employ capital in setting up wind energy farms.

It has been debated by scholars that the renewable sector should be absolutely exempted from tax. And rightly so, since India is transitioning its focus on the sector and will reap great benefits for its economy in the long run along with harvesting cheap electricity.

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