Solar equipments and parts to attract 5% GST only, says Revenue Secretary

Solar panel equipment will attract the lowest tax rate of 5% under the GST regime, as against the initially proposed 18%, Revenue Secretary Hasmukh Adhia said.

Responding to industry queries on twitter, Adhia said, "All solar equipment and parts would attract 5% GST only". Senior officials on Monday said that the GST Council, headed by Union Finance Minister Arun Jaitley and comprising state counterparts, is likely to reconsider the decision of levying 18% tax on solar equipment. These equipment fall under Chapter 85 of the GST Rate Schedule for Goods and include diodes, transistors and similar semiconductor devices, photosensitive semiconductor devices including photo voltaic cells, light emitting diodes (LED) and mounted piezoelectric crystals.

Also watch Photo Gallery of Top 10 Solar Power Plants.

The GST Council has already decided on a 5% tax rate on solar water heater and system, renewable energy devices and spare parts for their manufacture, bio-gas plant, solar power-based devices, solar power generating system and wind mills and wind operated electricity generator. There was confusion in the industry that if these were put in 5% bracket, why the equipment for solar panel manufacturing have been slapped with 18% GST. India is targeting 175 gigawatts of renewable energy generation by 2022. Of this, 100 GW would be from solar power, 60 GW from wind, 10 GW from biomass and 5 GW from small hydro power.

To achieve the proposed capacity of 100 GW target by 2022, the overall investment required would be around Rs 6 lakh crore and so keeping the duties down on solar power equipment is necessary. The Goods and Services Tax Council had brought down the levy on coal to 5% from the current tax incidence of 11.69%. With the lower GST rate on coal, the net value of dry fuel to the consumer is likely to come down. The GST Council had earlier this May fitted over 1,200 goods and 500 services in the tax brackets of 5, 12, 18 and 28%.