Summarized below could be the key issues that would impact
the Renewable Energy Generators:
1. Removal
of exemptions:
(i)
Benefits available on procurement of goods &
services utilize for generation of renewable energy viz., incentives like tax
holiday; exemptions to capital goods, inputs & services; concessional
excise & custom duties (whether part of the capital cost or operation and
maintenance costs), may come to an end in the new GST regime.
(ii)
Under GST, the concessional rate of tax for
inter-state purchases may no longer be available.
(iii)
Taxes paid on procurements would continue to be
non-creditable for the energy sector and hence, forming part of costs.
(iv)
It may be noted that BCD is not proposed to be
subsumed in the GST, therefore, it may be likely that the concession on BCD
would continue to remain.
2. Increase
in tax rates:
GST aims to provide a single rate of tax for goods
and services not exceeding 20%. In as much as 20% is substantially higher than
rates currently applicable on procurement of goods and services in the
renewable energy sector. Following taxes would be chargeable on supply of goods
& services
i.
Within State: Central GST (CGST) &
State GST (SGST).
ii.
Inter-State: Inter-State GST (IGST) +
addl. 1 % to be collected by the origin state ( applicable for 2 years) on Sale
of Goods. And in case of supply (including provision of services other than
sale of goods) only IGST would be applicable.
iii.
On Import: BCD + IGST. Here, it may be
possible that the concession on BCD would continue to remain.
iv.
On Import of services: IGST
3. Removal
of statutory forms:
Another factor is the removal of statutory forms. For
example, Form C issued to the Vendors for availing concessional CST rate of 2 %
would be done away with and this could increase the Inter-state Sale of Goods,
where upto 20% of would be applicable. However, GST has a provisions for
exemptions by State Governments and so renewable energy may be a fit case for
exemption.
Also, levy of taxes on consumption or sale of electricity is
proposed to be kept outside GST. However, the State Governments still have the
power to the tax the same. There is an ambiguity on this issue.
The Table below compares the Current regime with proposed
GST which may impact the Capital Cost & O&M in the Solar & Wind
Project (Grid Connected):
Solar PV Project
(Grid Connected)
Category
|
%
|
Procurement
pattern assumed
|
Current
regime
|
GST
|
Comments
|
Capital cost
|
|||||
PV
Modules
|
54.86%
|
Entirely
imported
|
No
customs duty is applicable as full exemption is available from BCD, ACD as
well as SAD
|
BCD
exemption could continue. However, there would be additional IGST of 20%
|
Removal
of exemptions - Increase in cost
|
Land
cost
|
4.13%
|
On lease
|
Service
tax applicable at 14.5%
|
CGST and
SGST would be applicable at 20%
|
Rate
under GST would be higher than current rate – Increase in cost
|
Civil
and General Works
|
8.25%
|
Only
installation services procured 50% within the State and 50% from outside the
state
|
Service
tax applicable at 14.5%
|
Inter-State – IGST applicable
at 20%
Intra-State - CGST and SGST
would be applicable at 20%
|
Rate
under GST would be higher than current rate – Increase in cost
|
Mounting
structures
|
8.25%
|
Procured
on inter-State basis
|
Excise duty – Exempt
CST - Applicable at 2%
(against Form C)
|
IGST
would be applicable at 20%. Further, additional tax at 1% would also be
applicable
|
Removal
of benefit against statutory forms would increase tax rate - Increase in cost
|
Power
conditioning unit
|
7.43%
|
Procured
within the State
|
Excise duty – Exempt
VAT - Applicable at
concessional rate provided by State (as highlighted above)
|
CGST and
SGST would be applicable at 20%
|
Rate
under GST would be higher than current rate due to removal of exemptions/
concessions – Increase in cost
|
Evacuation
Cost up to Inter-connection unit
|
9.08%
|
Considered
as goods – Procured 50% from within the State and 50% from outside the State
|
Excise duty - Exempt
CST applicable at 2% for
inter-State procurements
VAT applicable at concessional
rate provided by State for intra-State procurements
|
Inter-State – IGST applicable
at 20% plus additional tax of 1%
Intra-State - CGST and SGST
would be applicable at 20%
|
Rate
under GST would be higher than current rate due to removal of exemptions/
concessions – Increase in cost
|
Preliminary
and Pre-operative expenses including IDC and contingency
|
8.01%
|
Considered
as services – Procured 50% from within the State and 50% from outside the
State
|
Service
tax applicable at 14.5%
|
Inter-State – IGST applicable
at 20%
Intra-State - CGST and SGST
would be applicable at 20%
|
Rate
under GST would be higher than current rate – Increase in cost
|
Operation
and maintenance
|
|||||
O&M
|
100%
|
Assumed
as works contract – from within the State
|
VAT - Applicable as per
valuation and rate provided by State
Service tax – Applicable at
14.5% on 70% of the value
|
CGST and
SGST would be applicable at 20%
|
Impact
to be analyzed based on current rate applicable for each State
|
Impact on Wind
Power Projects (Grid Connected)
Category
|
%
|
Procurement
pattern assumed
|
Current
regime
|
GST
|
Comments
|
Capital cost
|
|||||
Wind
operated electricity generator, its components and parts thereof including
rotor and wind turbine controller
|
69.14%
|
30%
parts are imported, 35% are procured within the State and 35% are procured on
inter-State basis
|
Import -
Customs duty is applicable at 5.15% (BCD of 5% and 3% cess) - ACD and SAD are
exempt
Intra-State procurements –
Excise duty is exempt. VAT is applicable at concessional rate provided by
State (as highlighted above)
Inter-State procurements –
Excise duty is exempt. CST is applicable at 2% against Form C
|
Import - BCD exemption could
continue. However, there would be additional IGST of 20%
Intra-State procurements –
CGST and SGST would be applicable at 20%
Inter-State procurements –
IGST would be applicable at 20% along with additional tax of 1%
|
Removal
of exemptions and increase in tax rate would increase costs
|
Transformer
|
2.06%
|
Procured
within the State
|
Excise
duty is applicable at 12.5%
VAT is
applicable at concessional rate provided by State (as highlighted above)
|
Intra-State
procurements – CGST and SGST would be applicable at 20%
|
Increase
in tax rate would increase costs
|
Transportation
|
5.15%
|
50%
procured within the State and 50% procured on inter-State basis
|
Service
tax applicable at 4.35% (30% of 14.5%)
|
Inter-State – IGST applicable
at 6% (30% of 20%)
Intra-State
- CGST and SGST would be applicable at 3% each i.e. total
6% (30%
of 20%)
|
Increase
in tax rate would increase costs – Further, impact would be there if
abatement is removed/ changed
|
Services
|
23.66%
|
50%
procured within the State and 50% procured on inter-State basis
|
Service
tax applicable at 14.5%
|
Inter-State – IGST applicable
20%
Intra-State - CGST and SGST
would be applicable total 20%
|
Increase
in tax rate would increase costs
|
Operation
and maintenance
|
|||||
O&M
|
100%
|
Assumed
as works contract - from within the State
|
VAT - Applicable as per
valuation and rate provided by State
Service tax – Applicable at
14.5% on 70% of the value
|
CGST and
SGST would be applicable at 20%
|
Impact
for each State to be analyzed based on current rate applicable for
|
