Understanding Goods and Services Tax on Solar Energy Equipment
This article explains the Goods and Services Tax (GST) framework for solar power-based devices and systems in India. It defines solar equipment, clarifies GST applicability, and details specific rates for various components like solar panels, water heaters, and inverters. The discussion also covers how composite supplies for solar plant installations are taxed and confirms that no specific GST exemptions are currently available for these renewable energy devices.
All renewable energy equipment, including solar devices and solar power initiatives, are subject to Goods and Services Tax (GST). This article examines the applicability, available exemptions, and specific GST rates for solar energy products.
Definition and Scope of Solar Energy Equipment
Solar power involves converting the sun's renewable energy into electricity, either directly using photovoltaics or indirectly via concentrated solar methods. The term 'solar power' refers to the electrical energy produced from sunlight. Devices that operate by utilizing sunlight directly or indirectly are classified as solar power-based equipment. Common examples include:
- Solar pump
- Solar charger
- Solar dryer
- Solar water heater
- Solar lamp
- Solar cooker
The Advance Ruling Authority issued clarifications regarding the classification and GST rates for solar energy products in the case of M/s Utsav Corporation. They determined the following:
- Solar controllers: These components monitor system efficiency and battery lifespan. As they do not depend on solar power, they are categorized under HSN 8504 ("Electrical transformers, static converters and inductors") and taxed at 18% GST.
- Solar structures: These are not considered solar power-based devices and are subject to an 18% GST rate.
- Solar panels: Constructed from solar cells arranged in series, these semiconductor devices convert sunlight into electricity. They are classified as solar power-based devices and attract a 12% GST rate.
- Solar cookers: Regardless of whether they use a single or dual energy source, all solar cookers are subject to a 12% GST rate, as per recommendations from the 53rd GST Council meeting.
In essence, equipment that harnesses sunlight for energy generation, either directly or indirectly, falls under the category of solar power-based devices.
GST Applicability on Solar Power Systems
India's solar power industry is expanding rapidly, with the government actively supporting the sustainable development of advanced solar projects. The Ministry of New and Renewable Energy is focused on fostering solar energy growth. While most renewable energy devices incur a 12% GST, projects involving the installation, procurement, and commissioning of solar generating systems are treated as 'Works Contract Services.' For such contracts, 70% of the total value is subject to 12% GST (as supply of goods), while the remaining 30% is taxed at 18% GST (as supply of services).
Exemptions for Solar Power Devices under GST
Currently, the GST framework does not offer exemptions for renewable energy devices or their manufacturing components. All renewable energy equipment falling under Chapters 84, 85, and 94 of the Harmonized System of Nomenclature (HSN) is subject to a 12% GST rate.
GST Rates and HSN/SAC Codes for Solar Energy Products
The following table outlines the Goods and Services Tax (GST) rates along with their corresponding HSN (Harmonized System of Nomenclature) or SAC (Service Accounting Code) for various solar power-based devices and systems.
| HSN/SAC Code | Description | SGST | CGST | Total GST |
|---|---|---|---|---|
| 8419 12 | Solar water heater and system | 2.50% | 2.50% | 5% |
| 85 | Solar power generating system | 6% | 6% | 12% |
| 8504 | Solar inverter | 6% | 6% | 12% |
| 85 | Solar lantern/lamp | 6% | 6% | 12% |
| 85414011 | Solar panels | 6% | 6% | 12% |
| 84, 85 or 94 | General solar power-based devices | 6% | 6% | 12% |
| 9954, 9983, 9987 | Composite supply including goods and construction services for a solar power plant | Applicable as below | Applicable as below | - |
For a composite supply involving goods and construction services of a solar power plant, 70% of the total contract value is deemed a supply of goods and taxed at 12% GST. The remaining 30% of the contract value is treated as a supply of services and taxed at the standard service rate of 18% GST.