New
March 21, 2023
By
Harshini

MNRE clarifies on GST on renewable energy devices & levy of BCD on cells & modules

In August 2021, the Ministry of New and Renewable Energy (MNRE) in India had issued a clarification on the applicability of Goods and Services Tax (GST) on renewable energy devices and the levy of Basic Customs Duty (BCD) on cells and modules used in the manufacture of solar panels.

According to the clarification, GST on renewable energy devices such as solar lanterns, solar water heaters, and solar pumps would be levied at the rate of 5%. The clarification also stated that GST on solar inverters would be levied at the rate of 5% for those with a capacity of up to 10 kW and 18% for those with a capacity of more than 10 kW.

Regarding the levy of BCD on cells and modules used in the manufacture of solar panels, the MNRE clarified that a BCD of 40% would be levied on cells and modules that are imported for use in solar power projects. However, the MNRE also clarified that BCD would not be levied on cells and modules that are procured from domestic manufacturers, provided that they meet the prescribed criteria. It is important to note that these clarifications were issued by the MNRE in August 2021 and may be subject to change in the future.

The MNRE clarification on the levy of BCD on cells and modules used in the manufacture of solar panels is in line with the Indian government's efforts to promote domestic manufacturing of solar cells and modules. The government has set a target of achieving 100 GW of solar power capacity by 2022, of which 40 GW is expected to come from rooftop solar projects. To achieve this target, the government has introduced various measures to promote domestic manufacturing of solar cells and modules, such as the imposition of BCD on imported cells and modules.

In addition to the MNRE clarification, the Indian government had also announced in the Union Budget 2021-22 that BCD would be imposed on solar cells and modules at the rate of 20% and 40%, respectively, from April 1, 2022. This move is expected to further promote domestic manufacturing of solar cells and modules and reduce India's dependence on imports.

The clarification on the applicability of GST on renewable energy devices is also significant for the renewable energy sector in India. The clarification provides much-needed clarity on the applicable GST rates for various renewable energy devices, which would help reduce confusion and ensure compliance by stakeholders in the sector. It is worth noting that the GST rates for renewable energy devices were revised several times in the past, and the clarification from the MNRE provides the latest information on the applicable rates.

FAQs

Here are some FAQs related to the MNRE clarification on GST on renewable energy devices and levy of BCD on cells and modules:

Q: What is the applicable GST rate on solar inverters?

A: As per the MNRE clarification, GST on solar inverters would be levied at the rate of 5% for those with a capacity of up to 10 kW and 18% for those with a capacity of more than 10 kW.

Q: What is the applicable GST rate on solar pumps?

A: According to the MNRE clarification, GST on solar pumps would be levied at the rate of 5%.

Q: What is the applicable GST rate on solar water heaters?

A: The MNRE clarification states that GST on solar water heaters would be levied at the rate of 5%.

Q: What is the applicable BCD on cells and modules used in the manufacture of solar panels?

A: The MNRE clarification states that a BCD of 40% would be levied on cells and modules that are imported for use in solar power projects. However, BCD would not be levied on cells and modules that are procured from domestic manufacturers, provided that they meet the prescribed criteria.

Q: When will the BCD on solar cells and modules be imposed?

A: The Indian government had announced in the Union Budget 2021-22 that BCD would be imposed on solar cells and modules at the rate of 20% and 40%, respectively, from April 1, 2022.

Q: What is the objective of the MNRE clarification on GST and BCD for the renewable energy sector?

A: The objective of the MNRE clarification is to provide clarity on the applicable GST rates and BCD for various renewable energy devices and components, which would help reduce confusion and ensure compliance by stakeholders in the sector. The clarification is also in line with the Indian government's efforts to promote domestic manufacturing of solar cells and modules.

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