Power ministry seeks relief for renewable energy from GST impact

The Union power ministry has told the influential goods and services tax (GST) Council chaired by finance minister Arun Jaitley that implementing GST in its current form could push up power generation cost, especially of renewable energy, which will further dent the ability of debt-ridden distribution companies to serve electricity unless specific relief measures are built in.

While solar panels and other equipment used for power production will come under GST, the final product—electricity—has been kept out. This means power producers will not be able to set off part of the indirect tax liability on their output using credit for the taxes already paid on raw materials and services availed.

In a presentation made to the GST Council on 16 January, the power ministry proposed giving either deemed export status or zero GST rate for renewable power. The measures are intended to spare power producers from the tax cost of keeping electricity out of GST, and to compensate for the end of existing tax exemptions.

According to a copy of the presentation, reviewed by Mint, the capital expenditure of renewable energy companies—wind and solar—could go up by 10-12% which will warrant a power tariff increase by 30-40 paise for wind power and 40-50 paise for solar power. That is mainly because central excise duty exemptions and concessional state value added tax (VAT) on equipment and solar panels (0-5% levied by states) will make way for an 18% GST on the raw materials and services availed of by renewable power producers. Read more….