Indian Government is coming up with GST( Goods & Service Tax), which is a system of taxation to simplify tax structure in India. Under this format companies will have to pay single tax to the government instead of various individually applied taxes. Solar Industry currently gets many benefits from state and central government for e.g. Exemption in Custom Duty on Solar Panels, Exemption in CST, Reduced VAT charges e.g. 5% in most of the states and complete exemption in the state of Madhya Pradesh and Rajasthan. With the given tax breaks, overall scenario makes viability of solar very good.
GST Council has decided that GST rate for solar modules will be 18%. Premise for taking the decision is that Solar industry has reached to a matured stage and would not require tax break from government to grow. The ministry suggests that solar tariff has gone below current grid parity price, and with ongoing trend of lowering cost of solar products, It is expected to remain profitable even with higher GST tax rate.
In a detailed report by MNRE, it is mentioned that GST will negatively impact solar PV industry by 12% -15% across various states. However, GST's impact will be less on large companies as they will include increased cost while bidding but small solar companies will get affected more as they will have to show viability against commercial grid electricity.