GST on Renewable Products Slashed to 5%

Prior to this clarification, solar power developers were paying tax at the rate of 18% which had become a sticking point in the industry.

Solar Industry is in a state of relief after the GST council clarified that the devices and parts related to renewable energy will be taxed a 5% while the services related to the renewable energy industry will be attract a GST of 18%.

Prior to this clarification, solar power developers were paying tax at the rate of 18% which had become a sticking point in the industry forcing the delay of many projects.

While providing clarity on the confusion, the GST council said that certain disputes have arisen regarding GST rates where some goods which attract 5% tax are being supplied along with service of construction etc and other goods for solar power plant.

To resolve the dispute the Council recommended that in all such cases, the 70% of the gross value shall be deemed as the value of supply of said goods attracting 5% rate and the remaining portion (30%) of the aggregate value of such EPC contract shall be deemed as the value of supply of taxable service attracting standard GST rate.

However, there is still a confusion about when these new tax rates will become applicable and if these will be applied on existing projects as well.