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GST may hit solar capacity addition in 2018

India has already installed more solar capacity in the first six months of 2017 than in the entire 2016, according to a report by Mercom Capital Group, which tracks the Indian solar sector.

Around 4,800 MW has already been commissioned in calendar year 2017, against 4,038 MW in 2016. The report expected an addition of 10,500 MW through the year, which will be another record, almost twice the 5,525 MW added in financial year 2016-17. But 2018 is likely to be a different story because of confusion over applicability of the goods and services tax (GST) on solar products, the report warned.

“We have reduced the 2018 forecast by approximately 15% due to uncertainty surrounding GST rates, which has resulted in a slowdown in tenders and auctions.” TAX BUMP Initially, the government had maintained that all solar components would invite 5% GST, as reported by ET in its July 4 edition. Later, however, it clarified that only solar modules would be taxed at 5%; the other components would face 18% or 28%.

“Government agencies have created an environment of chaos and uncertainty surrounding these rates. It has brought auction and PPA signing activities to a standstill as nobody wants to move forward without knowing what the GST rates are going to be,” Mercom added. The ministry of new and renewable energy is urging the finance ministry to stick to the earlier 5% for all solar equipment, but a decision has yet to be announced.