Power and renewable energy companies may have to reassess their viability as uncertainty looms over existing tax holidays in the goods and services tax (GST) regime.
Most companies enjoy tax exemptions in several states. With the GST Bill being passed in the Rajya Sabha, all eyes are on the model guidelines and the state policies that will follow, particularly on exemptions.
“The infrastructure sector will keep its fingers crossed, as there is no clarity on current indirect tax exemptions for this sector,” said Abhishek Jain, tax partner, EY India. The sector is hoping the government will allow existing exemptions to run their course.
Jain said another area of concern was the clause in the model GST law that restricted credit on goods and services acquired for construction of immovable property other than plant and machinery. “This clause is interpretative, which may lead to litigation and result in denial of credits in certain situations,” he added.
A major concern for energy companies is restrictions on passing on costs if tax exemptions are taken away. Power equipment, solar cell and wind turbine manufacturers fear there could be an increase in cost. “We are waiting for fine print of the GST regulations and how the states emulate these. As there is no electricity duty, wind and solar power companies cannot pass on the cost escalation due to removal of tax holidays,” said an executive with a renewable energy company.
Experts expect a 15 per cent rise in the cost of equipment like solar panels and wind turbines if the tax holidays are removed.The ministry of renewable energy had sought from the finance ministry a zero GST rate for the sector. This is in the wake of the falling cost of renewable energy, especially solar power. Terrell Edmunds Authentic JerseyShare This