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Solar Power Developer Association Demands Uniform GST Rate of 5%

It says that the entire contract for supply of solar power generating system (SPGS), including service portion, should qualify as supply of SPGS and should be taxed as supply of SPGS at the concession

The Solar Power Developer Association (SPDA) is not happy with the recent recommendations of the GST Council, which was finalised on December 22, 2018.

Saying that the Council’s recommendations are inconsistent with the government’s policy of promoting clean energy, the association has demanded the goods and services tax (GST) rate to be kept uniform at 5 per cent on solar power generating system (SPGS), according to a PTI report.

The GST Council recommendations would be effective from January 1, 2019. When implemented, it would increase the total incidence of tax on the SPGS to 8.9 per cent.

Raising their demand, the SPDA wrote a letter to Finance Minister Arun Jaitley last week. It said, “…keeping in line with government endeavour to promote the renewable power sector and considering the specific facts of the solar sector, the entire contract for supply of SPGS should be taxed at the concessional rate of 5 per cent.”

The association also argued that the present recommendations of the GST Council would create a huge gap in the government policy and its implementation.

GST council recommendations

The 31st GST council meeting was held on December 22, 2018. In the meeting, the industry body recommended that in case of contracts for supply of SPGS, 70 per cent of the gross value of the contract would be deemed as the value of supply of goods and attract 5 per cent rate and the remaining portion (30 per cent) of the aggregate value of such EPC (engineering procurement and construction) contract shall be deemed as the value of supply of taxable services attracting standard GST rate.

However, the SPDA said that in case of contract for supply of SPGS, the scope of work primarily includes supply of goods. The association argued that the SPGS cannot be supplied in isolation without services such as installation and commissioning.

It pointed out that providing concessional rate of 5 per cent on only 70 per cent of the gross value of the contract for supply of SPGS would result in higher tax rate on supply of SPGS as compared to the erstwhile excise and service tax regime.

The effective tax rate will be 8.9 per cent, which is considerably high as compared to 1.5 to 2 per cent in pre-GST era, the SPDA said.

SPDA’s Demand

In addition, it said that the GST Council recommendations may increase cost of electricity not only for future projects but also for many operating plants wherein the power purchase agreement executed between DISCOMs and solar developers provides pass-through on the GST implication.

In its letter, the association demanded that the entire contract for supply of SPGS (including service portion) should qualify as supply of SPGS and should be taxed as supply of SPGS at the concessional rate of per cent.

Source:www.electronicsb2b.com