Ambiguity on GST irks solar players

Ambiguity surrounding the Goods and Services Tax rate on various inputs is troubling the solar sector, with industry players also saying that their suppliers are not passing on the benefit arising out of input tax credits, leading to higher prices and eventually higher tariffs for customers.

“There is no clarity when it comes to the GST rates,” Sanjeev Aggarwal, MD and CEO of Amplus Energy Solutions told The Hindu. “While the government is saying that there is a 5% rate on solar components, the truth is that the weighted average rate comes at about 10%. Some items are taxed at 18%, and some at the lower 5%. Others, like inverters, are even taxed at 28%.”

“Suppliers have also not yet started passing on the benefits of the input tax credits to us, so we are not getting the advantage of that either,” Mr. Aggarwal added.

While the 5% tax rate specified by the GST Council for solar components has increased the cost of the projects, the ambiguity over the other inputs — which are used for projects other than in the solar sector — is creating confusion among solar developers.

“The module, which is almost half of the cost of the solar system..., earlier there was no tax on it,” Gagan Vermani, founder and CEO at MYSUN said. “Now, it has come under 5%. Ultimately, it will increase the cost of the modules by 5%. And, we have to pass this on to the customers. Our cost of procurement has gone up, so the selling price will also go up.”

‘End use classification’

“There is also a little confusion on solar right now because the detailed gazette talks about structures, invertors, wires, and other components without specifying whether they are for solar or not,” Mr. Vermani added. “But there is a separate line item that says for solar utilities, the rate is 5%. So, there is confusion about whether an inverter, if it is being used for solar, comes under 5% or the normal rate of 28%.”

“Because GST is an end-use tax, the government cannot even discriminate between uses by saying that, say, an inverter used for solar purposes will be taxed this much, but for other purposes at a higher rate,” Mr. Aggarwal said. “This will be very difficult to implement and will also lead to misuse. How will one prove for what purpose it is being used for?”

The same is true for the other components as well.

“Everyday we are sitting with our tax consultants and trying to figure out the eventual impact on our projects,” Sanjay Garudapally, director, business development, Rays Power Infra said. “We are getting different answers. Some are saying 10%, others are saying other rates. Nothing has been clarified so far since GST has rolled out, but we expect something to be done in about three weeks to a month.”

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Printable version | Apr 12, 2021 10:30:31 AM |

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