India: solar tax will be 5%, minister confirms

India’s revenue secretary Hasmukh Adhia has confirmed that solar components will only be subject to a 5% Goods and Services Tax (GST) when the new rates are implemented on July 1, allaying fears within the solar industry that solar cells and modules were set to be slapped with a GST of 18%.

Taking to Twitter last night, Adhia wrote: “All solar equipments [sic] and its parts would attract 5% GST only”, before setting up a dedicated GST Twitter account designed to directly answer queries.

Last week it was widely reported that the GST Council would be placing solar cells and modules into the highest GST slab of 18% – a move that had served to all-but halt solar project development in India, Mercom Capital Group reported.

However, over the weekend reports emerged that the government was reconsidering this proposal given the negative response from industry. The minister’s tweet appears to allay most of the industry’s fears that hiked module and cell taxes could add up to 16% on a typical solar project’s costs.

This lower tax band, while still higher than the current 0% GST levied on solar cells and modules, will likely be welcomed as a sensible compromise, putting solar on par with wind and coal components.