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GST slab: Will it be breeze or blaze for players in wind and solar sectors?

According to reports, players in the solar and wind energy sectors are in fix over the tax slab they may fall under the Goods and Services Tax (GST) regime.

Currently, the effective tax rate on wind energy is 8.5 per cent, and that on solar energy generated from imported panels is close to 1.5 per cent. According to Harpreet Singh, Partner, Indirect Tax at KPMG India, “The government is likely to put renewable energy under the 5 per cent slab to balance the demands of both solar and wind players and to prevent a sudden windfall gain or loss to them.” However, in its recommendations to the Finance Ministry, the Ministry of New and Renewable Energy (MNRE) has pitched for a zero rate so that the vendors providing such goods and services at nil GST rate become eligible for input credits on capital goods and services used.

Any change in the overall tax incidence can be passed on to the consumer under the power purchase agreements signed by project developers, the MNRE has said.

A zero slab will be a bonanza for the wind energy sector, while it will make no difference to the solar players.

According to the Vice-Chairman of Indian Wind Turbine Manufacturers Association, Chintan Shah, “Under the zero-rated tax slab, wind energy players can cut tariffs by as much as 25 paise a unit.”

However, solar energy players will be hit and there will be a marginal rise in tariffs if the slab is fixed at anything above the zero-rate, according to the CEO of Ganges Internationale, Vinay Goyal.

Goyal said, “There will be an effective 10 paise a unit increase if the solar is kept in the 5 per cent slab. If it is put at 12 per cent slab, the cost will go up by 25 paise a unit.”

While the government is keen on phasing out exemptions for both solar and wind energy beyond a remunerative GST rate, the industry is still batting for a reverse credit mechanism against the 18 per cent slab. “The government can put green energy under the 18 per cent tax slab and continue the existing rebates by crediting them back to the manufacturers. This will allow for better monitoring of availed incentives,” Goyal said.

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