How narendra modi’s biggest tax reform gst is hurting his own solar power dream

How narendra modi’s biggest tax reform gst is hurting his own solar power dream

With an aim to light up the country with solar power, Narendra Modi-led government plans to achieve the target of 175 GW of installed renewable energy capacities by 2022. However, the road ahead doesn’t appear to be trouble-free for the government’s pet National Solar Mission (NSM) especially after the implementation of goods and services tax (GST) and possibility of anti-dumping duty. “As India focusses on installation of 175 Gigawatt of renewable energy by 2022, power purchase cost is expected to rise as solar modules becomes costlier following the levy of Goods and Services Tax, customs duty and potential levy of anti-dumping duty,” CRISIL report said.

GST

The solar modules have become costlier after the introduction of GST. The government levies a 5 percent tax on all equipment needed for generating solar power compared with nil duty now.

Safeguard duty

In addition, the government is planning to impose a 70 percent safeguard duty on solar equipment exports from China and a few other countries to protect domestic manufacturers. Such a duty may hurt prospects of the big project developers in India such as SoftBank-backed SB Energy, Reuters reported citing clean energy consultancy Mercom said

Customs duty

Over $150 million worth of solar modules were stuck at various Indian ports due to a disagreement over their classification and the import tax applicable to them, Reuters reported in January. The tax officials officials demand that a few of them must be classified as electric motors and generators, attracting a 7.5 percent duty, not as diodes, or similar kind of semiconductor devices which enjoy nil duty.

“Also, charges levied owing to only ~25% utilisation of transmission lines by renewable energy sources will add to the cost of the grid. Rising penetration of renewable energy will also result in frequent cycling and lower plant load factors at coal-based plants, thereby leading to higher variable cost,” CRISIL report said