Impact of GST on Renewable energy

Proposed GST Regime shatters the growth prospects of Energy Sector, forcing the policy makers to reconsider their decision

Renewable energy is referred to as the energy that depends on resources that can be naturally replenished like sunlight, wind, water and geothermal energy.

With ever increasing demand of power by the growing economies, a need for energy security, concern over environmental pollution and cost factors; the conventional methods of power generation using coal, diesel etc. have taken a setback with renewable energy becoming the need of the hour.

Even though energy generated by such replenishable resources is cheap, yet the initial cost of setting up the plants is exorbitantly high.

In order to promote setting up of such ventures and attract investors from across the globe, the Indian government has given several financial incentives. 100% tax holiday on the income for 10 years, concessional excise and custom duties are few of them. These incentives help investors recover their money and promote investments.

As the Indian economy is gearing for GST to get implemented with a hope to boost the country’s economy; the Ministry of New and Renewable Energy (MNRE) has released a report citing the adverse effects that the GST is likely to have on the growth of Renewable Energy sector, if GST is implemented in its current state.

According to the findings of the report, the cost of setting up and operations of different power plants could face an increase of around 11-20% post-GST implementation. The major reason for this would be an increase in tax rates along with removal of all exemptions and statutory norms in the current GST regime. This will hit the investors pretty hard thereby making it difficult to encourage further investments in the renewable energy sector.

The figures as reported anticipate an increase of 12-16% in the cost of Solar PV-Grids, 16-20% in the Off-Grid systems, 11-15% in the wind energy systems and 11-17% for the hybrid and solar combination projects.

Fearing the worst, the MNRE has requested for an exemption to renewable energy in the upcoming GST regime.

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