The Ministry of New and Renewable Energy (MNRE) recently submitted a request with the Department of Revenue for the exemption of renewable energy from some effects of the contentious Goods and Services Tax (GST) bill. The GST, which is a levy on the sale and consumption of goods and services in the country, was planned to come into effect by April this year, with the aim to bring the various Indian states under one umbrella.

However, there were industry concerns regarding the effect of the tax on renewable energy prices owing to changes in import duties on equipment brought into the country. According to the energy minister Tarun Kapoor, the GST can potentially raise the cost of solar power and other renewables due to higher taxes. Since the GST provides for the exemption of some taxes, the energy ministry asked for the exemption of renewables.

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Source: The Hindu

In spite of this, there are various potential advantages to manufacturers from GST. MNRE had commissioned a study to ascertain the effects of GST on the renewables industry, whose findings it shared with the Department of Revenue, predicting a 12-16% increase in the cost of grid-connected solar power projects in the country.

Other than the GST, another plan to rationalize corporate taxes from 33% to 25% is being formulated. This move would require the removal of tax exemptions that the solar industry enjoys. According to consultancy firm Bridge to India, the benefits under Section 80IA of the Income Tax Act, which gives a 10-year income tax exemption to solar developers, could be removed, impacting all solar power projects in the country. But since the minimum alternate tax (MAT) is already in force, the net impact on solar tariffs could hover around 4-5% or even less.

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