News @ Sterlite
Home / News at Sterlite / Power Sector needs more Power in GST

Power Sector needs more Power in GST

ETEnergyworld.com - October 13, 2016

INAGE02

Chandrapal Singh Gour
Head-GST, Sterlite Power

 

Introduction

Finally, India is ready for most ambitious indirect tax reform. With the ascent of President on constitutional amendment bill, the path of implementation of Goods & Service Tax (GST) Act is now clear. The motto of GST is to develop a common market by dismantling fiscal barriers among the states. GST is not only a tax reform but an overall business reform. Besides simplifying the current system and lowering the costs of doing business, GST will re-design supply chain management.

While GST is being seen as a game changer of economy, power sector is concerned about the impact of GST. Currently, this sector enjoys various exemptions and concessions at both centre and state level. With GST, all these benefits are bound to end. In spite of fact that power is one of the major inputs for manufacturing sector, output is outside the purview of GST, which may result in cost inflation.

Impact of GST on Power Sector

Renewable Energy

After implementation of GST, project costs of renewable energy companies will go up by more than 10% depending upon rate of GST. These companies are currently availing exemption/concession from various duties and other taxes on equipments. For example, solar modules, which account for more than 70% of the total capital cost and are largely imported, avail exemption/concession of customs duty, state VAT and other levies like entry tax etc. These exemptions/concession will not be available in GST regime.

Due to sudden rise in manufacturing costs, renewable energy tariffs are also likely to go up. The only way to minimise cost escalation is if renewable energy equipments are given exemptions under GST or if it is characterised as deemed export, under which taxes paid can be refunded to developer.

Transmission & Distribution

Transmission and distribution is currently exempted from service tax but it is unclear if that exemption will stay or go. If the same is kept outside GST preview then the cost of transmission & distributions companies will go up by more than five percent because of increase in input cost.

Transmission and distribution must be covered under GST so that entire input credit can be utilised and material used in building of transmission lines should be categorised in merit rate.

Conclusion

The strong government thrust to promote power sector and ambitious target of achieving 175 GW of renewable energy capacity by 2022 with equal distribution across the country will be directly affected by impact of GST. It is necessary to rationalise the tax treatment under new tax reform for this sector.

Reduced cost of projects will improve financial health of power sector and will encourage for new investment in this sector. Since electricity is one of the major inputs for manufacturing therefore any increase in cost of electricity will directly hit the cost of other products, which will result in overall inflation.

We expect that the GST Council will consider above concern of sector and will take appropriate action for the benefit of sector and country.

Share Button

Media Contacts

Balaji Krishnaswami
Email:
Balaji.Krishnaswami@sterlite.com

Events

Mar 06, 2018
DUBAI WORLD TRADE CENTRE, UAE | Stall No- H2f38
View Details
Mar 10, 2018
INDIA EXPO MART GREATER NOIDA, NCR, INDIA | Stall No- H1A8
View Details

Press Release

Sterlite Power project to supply over 1,200 MW electricity to Ranchi and Purulia
New Delhi - January 13, 2017
Read More
Sterlite Power Achieves Financial Closure for Transmission Project - YES BANK underwrites Project Finance Facility of INR 800 Crores
New Delhi - January 04, 2017
Read More