There is still no clarity on the rules of Goods and Service Tax (GST) that’s applicable on solar plants and the issue has divided the industry as well as the two state appellate who ruled differently to the individual plea of the appellants. Two different decisions were received from the Karnataka and Maharashtra Advance Ruling Authorities which was to levy GST rate at 5% and 18% respectively.
The Karnataka Appellate Authority for Advance Ruling (AAAR) was of the opinion that supply of photovoltaic modules is a unique transaction and cannot be naturally bundled with the supply of other components and parts of a solar plant. Until now, there has been no clear definition of solar power generating system under the GST regime, but there have been similar scenarios under the previous excise law where similar exemptions were provided to non-conventional energy devices.
In general, it is observed that the supply of other components and parts and the supply of services of erection, installation, and commissioning of the solar power plant are ‘composite’ as they are naturally bundled and accordingly, the tax rate applicable to the dominant nature of supply will prevail.
Contradicting to the Karnataka AAAR ruling, the Maharashtra AAAR in the case of Fermi solar farms and Giriraj Renewables held that the supply of solar power generating system consists of composite work contract in turn liable to an 18% tax in sync with general belief.
The solar industry is also in a state of confusion and is charging 18% and 5% differently as per their understanding and hence a clear notification from the government might be of great help to the industry and developers.
Source: reconnectenergy
