Key Takeaways

• The GST rate on renewable energy devices has been reduced from 12% to 5% to promote green energy adoption.
• This reduction applies to various products, including solar power systems, hydrogen vehicles, and waste-to-energy devices, effective from September 22.
• The reform is expected to lower project costs, drive demand, and support India’s goal of achieving 500 GW of non-fossil fuel capacity by 2030.

GST Rate Reduction for Renewable Energy

The Goods and Services Tax (GST) Council has announced a significant reduction in the GST rate on renewable energy devices, decreasing it from 12% to 5%. This move aims to enhance the adoption of green power solutions across India. The decision was made during the Council’s 56th meeting and will take effect on September 22.

The range of products affected by this reduction includes fuel cell motor vehicles, solar cookers, solar water heaters, photovoltaic cells, solar power generators, wind mills, and biogas plants. The government’s goal is to promote the use of renewable energy goods, reflecting the commitment to transitioning towards sustainable energy sources.

Several industry leaders have expressed their support for this initiative. Rohit Chandra, Co-Founder and CEO of OMC Power, noted that the reform would benefit rural empowerment and sustainable energy solutions, ultimately strengthening India’s economic framework. Similarly, Amit Paithankar of Waaree Energies indicated that lower project costs will accelerate capacity additions necessary for meeting India’s clean energy goals.

Additionally, this GST reduction will bolster the financial viability of projects within the renewable energy sector, potentially attracting more investments. Vinay Rustagi, Chief Business Officer of Premier Energies, emphasized that the resulting decrease in consumer costs is anticipated to support a broader transition to renewable energy in the country.

The reform is also seen as a signal to investors, enhancing financial returns and encouraging private participation in the renewable sector. Analysts believe that reduced capital costs will lead to more competitive tariffs in renewable energy auctions, while Ishver Dholakiya, Founder of Goldi Solar, stated it would create a more robust environment for investments.

Amit Rautela, CFO of Meja Urja Nigam, provided insight into the government’s tax structure adjustments on coal, suggesting that the shift from 5% to 18% GST on coal may not significantly impact thermal generators. He remarked that this change appears to be structural rather than an added burden.

The potential ramifications of this GST reform suggest a brighter future for India’s renewable energy landscape. With a focus on reducing project costs and enhancing the competitiveness of the sector, the changes are expected to facilitate the country’s aim of achieving 500 GW of non-fossil fuel-based capacity by 2030.

Enhancements in affordability for clean technologies will not only accelerate the adoption of renewable solutions but also contribute to road safety and energy independence. Globally recognized figures like Srivatsan Iyer, Global CEO of Hero Future Energies, highlighted that this reform aligns with India’s commitment to its energy targets, bringing the nation closer to a sustainable future and the goal of achieving net-zero emissions by 2070.

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