India hikes solar cell and module tax rate to 18%

The Indian government has proposed increasing the goods and services tax (GST) rate paid on solar cells and modules to 18% while keeping coal in the lowest tax slab of 5%.

This decision has been welcomed by the country’s power, coal, renewable energy and mines minister Piyush Goyal, who said that the entire GST regime is designed to bring down the cost of goods while also being an efficient mechanism against corruption.

Goyal defended the government’s decision to increase GST on solar components, stating: “Tariffs for solar projects vary from project to project. The rise will be compensated by the decline in corruption and operational difficulties.

“Solar and wind energy have hit record lows and the industry is now able to stand on its own feet without any support,” Goyal said.

Coal, meanwhile, was fixed at a 5% GST tax rate against its current tax incidence of 11.69%. Other solar power-based devices were also grouped in this 5% slab, including solar water heater systems, solar powered devices, and solar lamps and lanterns.

India’s National Solar Mission (NSM) is working towards the ambitious target of 100 GW of installed solar capacity by 2022. Currently, the cumulative installed capacity in India is above 12 GW, and many leading analysts expect around 10-12 GW of new capacity to be added in 2017.

Recent trends in India continue to point towards record-low prices at auction, with a recent 1.5 GW tender announced in Tamil Nadu setting an upper tariff limit of INR 4/kWh ($0.062/kWh). In the state of Haryana, meanwhile, solar components have recently been exempted from VAT.