Despite the government and the GST Council repeatedly clarifying that all solar power-based devices should be taxed at 5%, players in the solar water heater space say that their components are still being taxed at the higher 18%, which is leading to higher input costs.
The GST Council had, in 2017, reduced the rate on inputs for solar components to 5% from the previous 18%, adding that “all solar equipment and its parts would attract 5% GST”.
The Solar Thermal Federation of India, however, has alleged that some Customs officials in Chennai and Bengaluru are denying the 5% rate for solar evacuated tubes, which are exclusively used in solar water heaters, on the basis that the tubes do not generate electricity themselves. The officials have instead classified the tubes as glass products and taxed them at 18%.
“What is happening is that inputs for solar water heaters are being taxed at 18%, but the solar water heater itself has to be sold at 5%,” a spokesperson for the STFI told The Hindu . “This is unnecessarily adding to our costs.”
The spokesperson said that STFI and other industry bodies had approached the GST officials to rectify this situation.
“Their response has been positive and they have agreed that our case has merit,” the spokesperson added. “They said they will take this up during the next GST Council meeting, when it happens.”
The officials also agreed that such a scenario was, in fact, harming the ‘Make in India’ programme since full solar water heater systems imported into the country were taxed at 5%, while those manufactured in India had to pay 18% on inputs, thus discouraging domestic manufacturing.
