Earlier this year, the Government of India officially introduced an important tax reform called the Goods and Services Tax (GST). But what does this mean for the future of renewable energy in the country? A new policy brief helping to answer this question was prepared by Climate Parliament staff in India and was circulated among legislators in our network.
Despite the government’s ambitious aims to make 175 GW of renewable power available by 2022, solar and wind energy have been put in a higher tax bracket than before the reform. For example, while previously the solar sector was tax exempt in most states, taxes will now be levied at 5%. Similarly, taxes on wind energy components such as turbine controllers and electricity generators will increase to 5% from the earlier 3-4%.
An additional concern is the 60% reduction in taxation on coal which has been introduced. This is likely to bring about a significant drop in the cost of coal power generation and could threaten the future of renewable energy in India.
It is clear that the GST reforms represent added hurdles to renewable energy development and achieving India’s targets to build a low carbon economy. It is more important than ever that legislators in the region work hard to promote renewable energy and do not let this bump in the road act as a barrier to the development of clean, sustainable, and affordable energy for all.