In a notable advancement for the manufacturing of renewable energy components within the nation, the Goods and Services Tax (GST) Council convened on Wednesday and resolved to lower the tax rate on these components, which include solar cells, biogas plants, and windmill equipment, from 12% to 5%. The Central Board of Indirect Taxes and Customs indicated that the purpose of this decision is to encourage the use of renewable energy products in the country. These products have already been subjected to an inverted duty structure. Although the reduction of the GST rate to 5% will exacerbate this inversion, a mechanism for refunds resulting from the inverted duty structure is in place. Furthermore, procedural reforms will guarantee prompt refunds,” it stated. The newly established 5% GST rate encompasses solar cookers, biogas plants, devices powered by solar energy, solar power generators, windmills, wind-operated electricity generators (WOEG), waste-to-energy plants and devices, solar lanterns or lamps, devices or plants utilizing ocean wave or tidal wave energy, and solar photovoltaic (PV) cells, whether they are assembled in modules or not.
Fuel cell motor vehicles, including those powered by hydrogen, such as trucks and buses, are also covered under this rate. This initiative is expected to significantly enhance efforts to develop green hydrogen-based transportation within the country. Green hydrogen is anticipated to become the fuel of choice for long-distance transportation, including trucks and buses. In a substantial reform of the GST framework, the council on Wednesday approved tax reductions across various products and sectors, and also made the decision to abolish the 12% and 28% GST brackets, transitioning most goods and services in these categories to 5% and 18%, respectively. The initiative to categorize green power components under the 5% tax bracket aligns with India’s goal of achieving self-sufficiency in the domestic production of these components. Currently, India manufactures solar modules with a capacity of 100GW domestically. The government is actively working to increase cell production and establish a local supply chain for essential components such as wafers and ingots, which are predominantly imported from China.The reduction in taxes is likely to lower the cost of renewable energy generation in the country and eventually tariffs for consumers, enhancing its adoption by power distribution companies and enterprises. As the reduction makes renewable power attractive, upcoming projects that use these components at lower rates will likely find better demand for their power.
