The Solar Power Development Association (SPDA), in a letter to Finance minister Arun Jaitley, insisted that the goods and service tax rate on solar power generating system (SPGS) be kept at a uniform five percent, citing the recent counsels of the GST Council at odds with the government’s policy of advocating renewable energy. With the enactment of the proposals finalised on 22nd December of this year and taking effect from the start of the following year, the total tax payable by SPGS would go up to 8.9 percent.
In their 31st meeting held on 22 December, the GST Council suggested that seventy percent of the total value of the EPC (Engineering Procurement and Construction) contract for the supply of SPGS be regarded as value of supply of goods at a tax rate of five percent. The remaining thirty percent would be considered as value of supply of services at the standard GST rate. In response, the SPDA informed that supply of goods takes up the major scope of work, with supply of services accounting for no more than five percent of the gross value of the contract and so, the proposed scheme would result in higher tax rate as compared to 1.5 to 2 percent in the former tax regime.
The body stated that the suggestions of the GST Council, if implemented, would increase cost of power consumption for upcoming projects and functioning plants. Instead, the entire contract should be considered as value of supply of SPGS and should be taxed at the concessional rate. SPDA added that in the last eight months, it had provided the Ministry of Finance with the requisite documentation in support of its demand.