The new Indian Goods and Services Tax (GST) bill was enforced in July 2017. It introduced a new concessional 5% tax rate on solar PV equipment such as cells and modules, while the government plans to extend it to all equipments required for solar power generating plants.
In May 2017, the government originally planned a 18% GST for solar PV cells and modules but later decreased the amount to 5% for solar. In the meantime, Indian solar PV average auction tariffs have witnessed a continuous decline in India over the past few years and even with a 5% tax increase of the solar equipment, the cost of setting up solar projects in India remains interesting. The government highlights that a 5% level of impact will be easily absorbed by the ongoing decline in project costs.
This tax increase will lead to an increase in engineering, procurement & construction (EPC) as well as project costs to cover the tax increase on capital goods for solar projects. Indian solar PV domestic manufacturers also highlighted the increasing competition they face from the low-cost Chinese modules and fear that this tax might compromise their operations.
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