What is the current GST rate on solar panels in India?
As of August 2024, the GST rate on solar panels is 12%. This rate applies to photovoltaic cells, solar water heaters, and other devices that convert solar energy into thermal or electrical energy. The rate was increased from 5% to 12% following the GST Council’s decision in 2021 to correct the inverted duty structure in the solar industry.
How is the GST applied to Electricity transmission and distribution services?
Electricity transmission and distribution services provided by state-run entities are exempt from GST.
However, if these services are provided by private players, they are taxable at 18%. This exemption is aimed at keeping energy costs lower for consumers but creates a differential tax treatment between public and private sector entities.
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Are there any tax incentives for companies involved in renewable energy projects?
Yes, Indian government offers various tax incentives for companies in the renewable energy sector. These include:
Accelerated Depreciation: Companies can claim up to 40% depreciation on renewable energy equipment in the first year. The standard depreciation rate for general plant and machinery in India stands at 15 percent.
Section 80-IA Deduction: A 10-year tax holiday on profits generated from power generation, transmission, or distribution, including renewable energy projects.
Concessional GST Rates: Equipment like wind turbines, solar modules, and inverters have lower GST rates to promote renewable energy deployment.
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What are the customs duty rates for importing energy-related equipment in 2024?
The 2024 Budget introduced several changes to customs duties on energy-related equipment. For example Basic Customs Duty (BCD) of 40% is set for imported solar modules and 25% on imported solar cells to promote domestic manufacturing.
How does the Agricultural Infrastructure and Development Cess (AIDC) impact the energy sector?
The AIDC applies to certain imported goods, including crude oil and coal, at rates ranging from 2.5% to 5%. This cess is intended to finance agricultural infrastructure improvements but increases the cost of imports for energy companies reliant on these materials.
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Can energy companies claim Input Tax Credit (ITC) on GST paid for capital goods?
Yes, energy companies can claim ITC on GST paid for capital goods like machinery and equipment used in the production of taxable goods or services. However, if the goods are used for exempt supplies (like transmission services by state-run entities), ITC is not available.
What is the GST rate on services provided by electric vehicle (EV) charging stations?
The 36th GST Council meeting decided to reduce the GST rate on electric vehicles from 12% to 5% and chargers or charge stations from 18% to 5%. This reduced rate is part of the government’s efforts to encourage the adoption of electric vehicles and support the development of EV infrastructure.
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Are there any GST exemptions for the hydroelectric power sector?
Yes, there are some GST exemptions and benefits applicable to the hydroelectric power sector in India.
One key exemption include the waiver of inter-state transmission system (ISTS) charges for hydroelectric power plants (HEPs), which has been extended to include pumped storage plants (PSPs). This waiver is available for projects where construction starts by June 2025, with a partial waiver extending to 2028
Additionally, the government has introduced provisions that include the reimbursement of state GST for specific categories of hydro projects, particularly pumped storage projects. This is intended to promote the development of these projects by reducing the financial burden on developers.
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How are carbon credits taxed in India?
In India, income from the sale of carbon credits is taxed under Section 115BBG of the Income Tax Act 1961.
This section, introduced in 2017, levies a concessional tax rate of 10% on income earned from the transfer of carbon credits. This tax applies regardless of the income slab of the taxpayer, providing a lower tax burden compared to normal business income tax rates. However, no deductions are allowed for any expenditures or allowances while computing this income.
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What are the tax implications for the import of natural gas?
The import of natural gas (LNG) is subject to customs duties, including a Basic Customs Duty (BCD) of 2.5%, and SWS Cess of 10%. These taxes contribute to the final cost of these critical energy inputs and impact pricing at the consumer level.
What is the GST treatment of energy storage systems like batteries?
| Battery Type | HSN Code | GST Rate |
| Primary cells and primary batteries (non-rechargeable, like AA, AAA, C, D, button cells) | 8506 | 18% |
| Lithium-ion batteries (used in laptops, mobiles, tablets, power banks) | 8507 | 18% |
| Lead-acid accumulators (used in vehicles, inverters, UPS) | 8507 | 28% |
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