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Application of GST in the Rooftop Solar Industry- Part 2

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There is already an overwhelming amount of information out there on the internet about the impact of GST on various things and renewables as well. Take a look at Part 1 of the article on GST here. This article focuses specifically on Rooftop Solar and gives you a snapshot of the impact with relevant links.

Cost of Solar Power with GST

It will have no impact on the cost of ‘solar power’ which means taxes on sale of power through renewable sources will continue to have the same tax structure (refer). This means there will be zero tax on sale of solar power (10 year tax holiday continues).

However, this does not exempt the ‘goods’ or ‘services’ used for setting up a solar power plant from GST (Impact on GST on Renewable Energy). Hence, the overall cost of setting up a plant may rise by Solar-Industry’s-only-margin of 12-16%! Hence, the tariff calculations would be different and pay back periods higher if same tariffs are maintained. This might be a step or two back from where we stood before and might make the tariffs slightly less ‘competitive’. What will also get removed is exemptions and concessional duty benefits (Renewable Energy Sector lobbies for exemption).

Hence, ‘delivered cost of electricity’ would increase. Hence, affecting attractiveness of Rooftop Solar. But, solar might still remain viable, perhaps not as viable but, viable. I’ll let the market take a call on that. Let’s take a brief look at some of the expected tariff changes:

Levelised cost impact_GST

Cost of Power with GST

It’s not all over for solar with this escalation. The cost of power is also set to rise with the increase in taxation from 15% to about 18% increasing per unit tariffs, effectively nullifying the effect of escalated solar costs in light of this increase. As a matter of fact, the more the electricity tariff, the more the savings with solar, so there might be an apprehension among people about rising solar cost because of GST, however, effectively, there might be little change (in terms of economic viability).

All in all, GST might function like a temporary placebo of price increase, preventing sale of Solar Power Plants. Let’s see what the market has to say.

Tanya Batra

Tanya keeps a close track of policy updates in the field of Rooftop Solar in India and likes to write blogs on its application for the end customer

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