Delhi High Court paves way to untangle GST knot for solar firms

A consultative meeting will be held with CBIC within the next four weeks for the solar power producers to put forward their grievances

Solar power developers are hopeful of relief in GST rates after the Delhi High Court’s order directing authorities to redress their grievances.

The court last week directed Central Board of Indirect Taxes and Customs (CBIC), Ministry of New & Renewable Energy and GST Council to look into their concerns.

As per the court order, on a petition being filed by the Solar Power Developers Association (SPDA), a consultative meeting will be held with CBIC within the next four weeks for the solar power producers to put forward their grievances. Ministry of New & Renewable Energy may also take part in the meeting.

Post the deliberations, a report will be placed before GST Council for consideration upon those points.

Currently, solar power producers are subject to GST in the ratio of 70:30, that is 70% is considered as goods and attracts 5% tax rate, while 30% is accounted as services, which is taxed at 18%. Hence, the effective tax rate works out to be 8.9%.

An SPDA spokesperson said, “We are thankful to GST Council for bringing necessary clarity on the taxability of various types of contracts for supply of goods and services in the solar power generating system. But with the 70:30 ratio of supply of good and services, the industry is ending up paying a higher effective tax rate of 8.9%, which is impacting the financial viability of solar projects. We welcome the decision of Hon’ble High Court of Delhi and as directed, we shall bring relevant facts and figures to the table before CBIC and hope to reach an amicable and fair settlement on the issue.”

Abhishek Jain, tax partner, EY India, said, “The direction by the court in this ruling is quite an unconventional one. Various players in the solar industry had concerns on the deemed proportion of services, as the services component in setting up projects was significantly lower than 30%. The directed deliberation with the Board does create a ray of hope for further relief for this industry.”

Though there is a silver lining for the solar industry, the delay in getting clarity and resolving the issue is a let down.

“It is unfortunate that after almost two years since GST was introduced the solar industry is still searching for clarity about the tax rate. The confusion in implementing GST, and reimbursement delays have contributed significantly to the slowdown in installations over the past two years,” said Raj Prabhu, CEO, Mercom Capital Group, in a statement.

Source- DNA.

The post Delhi High Court paves way to untangle GST knot for solar firms appeared first on GST Station.



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