Country’s solar industry has sent out an SoS to policy makers, including key officials in the financeNSE -0.60 % ministry, seeking urgent clarification on the rate of goods and services tax (GST) on solar projects after controversial Authority for Advance Rulings (AAR) held these would face 18% and not 5%. 

This, the industry fears, could not only derail its whole arithmetic on tariffs and render projects unviable but also dent Prime Minister Narendra Modi’s plan for 100 gigawatts by 2022. 

The problem has genesis in the fact that concessional GST rate of 5% applies to solar power generating system, but solar power generating systems (SPGS) are is not defined in the law. 

Absence of a definition has led to ambiguity and different interpretations with regard to meaning and taxability of SPGS. The Solar Power Developers Association (SPDA) in a representation to the finance secretary Hasmukh Adhia has petitioned that the ambiguity in interpretation and diverse advance rulings on the issue should be examined by the Law Committee and taken up in the GST Council meeting scheduled for August 4, 2018. 

The association has also represented to finance minister Piyush Goyal. “Complete clarity on the quantum of tax applicable is very essential to arrive at fair cost and tariffs,” said Shekhar Dutt, director general, SPDA. “Continuity of ambiguous tax structure is affecting the solar tariffs and recent advance rulings by various states authorities has been very alarming towards additional tax burdening on the projects as their interpretations aren’t aligned with 5 % GST guided by the law. It raises serious concerns on economics/viability of the projects,” Dutt said. 

Different views have been expressed by different state Authorities for Advance Ruling regarding taxability of SPGS. This has further accentuated confusion amongst the industry players and leading to varied practices. 

Two rulings from the Maharashtra authority favoured a GST rate of 18%, treating installation as a whole works contract. A Karnataka authority ruling held installation be taxed at the concessional rate of 5%, applicable on equipment. The solar power sector enjoyed concessions under excise, customs as well as value added tax under the previous tax regime. 

The current situation is impacting solar industry and hence, there is an urgent need to address the same, the solar power developers said in their representation.