India has made significant strides in its renewable energy sector by surpassing 100 gigawatts (GW) of solar photovoltaic (PV) module manufacturing capacity. In line with this, the government has recently announced an initiative to reduce the goods and services tax (GST) on solar PV modules and wind turbine generators. They’ve lowered the tax rate from 12% to 5%. This simple move will dramatically accelerate the transition to renewable energy. It will further reduce the cost of capital for both solar and wind projects.
This decision is come as a part of a bigger plan to reduce taxes expensive consumer goods. It underpins India’s ambitious plan to increase its non-fossil fuel capacity to 500 GW by 2030. The tax cut is predicted to decrease the capital cost for solar and wind power projects by approximately 5%, making renewable energy sources more financially viable for stakeholders.
Impact on Solar and Wind Projects
Industry experts say reducing the GST could reduce clean energy tariffs by a large margin. This amendment, if enacted, will provide the needed shot-in-the-arm to the Indian renewable industry. This past Friday, Waaree Energies, one of India’s largest solar equipment manufacturers, dropped a bombshell. They will immediately share the fruits of the tax cut with their ratepayers. This pledge is poised to make solar installations more affordable than ever before across the country.
“The tax cut for solar PV modules and wind turbine generators is expected to reduce the capital cost for solar and wind power projects by about 5%” – Girishkumar Kadam, ICRA senior vice-president and group head
Almost 44 GW of renewable development is awaiting interconnection and firm power supply agreements. We believe this tax reduction will significantly increase the likelihood of those projects receiving the go-ahead. The reduced costs of these projects would allow them to be developed much faster, accelerating India’s move towards cleaner sources of energy.
Broader Implications for Renewable Energy Sector
The recent tax amendment echoes India’s broader efforts to strengthen its renewable energy industry. By removing financial obstacles, the government hopes to bring in greater investments – investments that are key to meeting the government’s aggressive goals.
Saurabh Agarwal, EY India’s tax and new energy partner, said the benefits of the cut were manifold. He cautioned the audience, let’s not lose sight of some short-term hurdles it could quickly create. These challenges are far outweighed by the long-term benefits as India forges ahead in its advance toward clean energy solutions.
So it’s a big deal that the Indian government is making such strong moves to assert greater control over its domestic energy requirements. Simultaneously, it is playing an important role in the world stage to fight climate change. Amplifying the message to prioritize expanding renewable capacity. This is truly welcome stuff, especially as countries around the world line up to transition away from fossil fuels.