Solar panel equipment will attract the lowest tax rate of 5 per cent under the GST regime, as against the initially proposed 18 per cent, Revenue Secretary Hasmukh Adhia said.

Responding to industry queries on twitter, Adhia said, “All solar equipment and parts would attract 5 per cent GST only”.

Senior officials today said that the GST Council, headed by Union Finance Minister Arun Jaitley and comprising state counterparts, is likely to reconsider the decision of levying 18 per cent tax on solar equipment.

These equipment fall under Chapter 85 of the GST Rate Schedule for Goods and include diodes, transistors and similar semiconductor devices, photosensitive semiconductor devices including photo voltaic cells, light emitting diodes (LED) and mounted piezoelectric crystals.

The GST Council has already decided on a 5 per cent tax rate on solar water heater and system, renewable energy devices and spare parts for their manufacture, bio-gas plant, solar power-based devices, solar power generating system and wind mills and wind operated electricity generator.

There was confusion in the industry that if these were put in 5 per cent bracket, why the equipment for solar panel manufacturing have been slapped with 18 per cent GST.

India is targeting 175 gigawatts of renewable energy generation by 2022. Of this, 100 GW would be from solar power, 60 GW from wind, 10 GW from biomass and 5 GW from small hydro power.

To achieve the proposed capacity of 100 GW target by 2022, the overall investment required would be around Rs 6 lakh crore and so keeping the duties down on solar power equipment is necessary.

The Goods and Services Tax Council had brought down the levy on coal to 5 per cent from the current tax incidence of 11.69 per cent. With the lower GST rate on coal, the net value of dry fuel to the consumer is likely to come down.

The GST Council had earlier this month fitted over 1,200 goods and 500 services in the tax brackets of 5, 12, 18 and 28 per cent.

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