GST has increased the Solar Project cost by 12%

All India Solar Industries Association (AISIA) while petitioning the government against the rise in tax incidence on solar power equipment under the new regime said that GST has led to 10-12 per cent rise in overall cost of solar projects which in turn will result in increase in the cost of power.

While solar power generating systems are charged at 5 per cent tax, procurement and supply of equipment like module mounting structures, trackers, inverters, transformers and cables are being charged at varying rates. Under the GST regime taxes are being charged on individual items rather than treating them as a part of solar power generating system.

Solar module were exempted from all duties in the pre-GST regime but since July 1 they are being charged at 5 per cent Goods and Services Tax (GST). Inverters, cables and transformers were levied by 2 per cent central sales tax and excise was exempt but post GST they are charged 5-8 per cent tax. Similarly, the tax incidence on services and civil work has risen to 18 per cent from 15 per cent and 6 per cent respectively.

Since solar power generating systems are already charged at 5 per cent GST, there should be no GST on individual equipment’s which are part and parcel of the solar generating system.