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Solar capacity addition
Why is it in the news ?
- According to a Crisil report, Inconsistent government actions have cast a shadow over developer sentiment in the solar sector and slowed down capacity addition momentum.
- This will result in the government achieving only 60% of its 100 GW target by 2022.
More in the news
Findings of the Report:
- India’s solar sector installed capacity is expected to touch 60 GW by 2022 and 70 GW by 2023.
- Crisil Research expects solar power capacity additions of 48-50 GW between fiscals 2019 and 2023.
- Developers sentiment has been negatively impacted by the lack of clarity on several policy issues and arbitrary bid cancellations, which is contrary to a supportive policy stance from the government.
- The two main factors increasing cost pressures for the solar sector included:(1) The imposition of the safeguard duty on solar component imports and(2) The uncertainty over the Goods and Services Tax treatment of the sector.
Tax Ambiguity:
- Ministry of New and Renewable Energy had issued a clarification on the issue, saying that entirely solar projects would be taxable at 5%.
- However, at the same time, it also said that if an engineering, procurement, and construction (EPC) contract included both supply and services, it would be adjudged on a case-to-case basis.
- This has created a concern, as most projects were set up on an EPC basis, whether in-house or outsourced.
- Later the GST Council in December 2018 clarified that in the entire value of the EPC contract, where 70% will be taxed at 5%, and 30% at 18%, to factor in both the supply and service component.
Source
The Hindu.