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GST rates on solar power based devices and systems

Updated on :  

08 min read.

All renewable energy devices, including solar devices or solar power projects, are covered under the ambit of GST. This article throws light on the applicability, exemptions and GST rates on solar power based devices.

Definition and scope of solar power based devices and system

Solar power converts renewable energy from the sun into electricity either directly through photovoltaics or indirectly through concentrated solar power. The electrical energy generated from the conversion of sunlight is called solar power. The products directly or indirectly powered by sunlight are called solar power based devices. Below are some examples of commonly used solar power based devices:

  • Solar pump
  • Solar charger
  • Solar dryer
  • Solar water heater
  • Solar lamp

The Advance Ruling Authority has provided certain clarifications in the case of Sapna Gupta. She is the proprietor of M/s Utsav Corporation, which offers products and services related to renewable energy sources. The entity had sought advance ruling for classification of solar energy products and the GST rate applicable to the.

  1. Solar controller: It measures the efficiency of the entire system and determines the operating life of the batteries. It is not a device-dependent on solar power. So, it will fall under HSN 8504, which is read as “Electrical transformers, static converters and inductors”, and are taxed at 18%.
  2. Solar structure: They are not solar power-based or solar power-based devices.  Thus, solar structures are taxed at 18% GST.
  3. Solar panels: They are made of solar cells and are connected in series. They are made of semiconductor material that converts sunlight into electrical energy. Thus, they are considered solar power based devices and charged at 12% GST.

Thus, devices that directly or indirectly use sunlight for generating energy are called solar power based devices. 

Applicability of GST on solar power based devices and systems

The solar power sector is a fast-growing industry in India. Thus the government aims to promote the sustainable growth of innovative solar projects. The Indian Ministry of New and Renewable Energy wants to promote solar energy and promote sustainable growth of solar projects. All renewable energy devices are taxed at 12% GST. But, if the project includes erection, procurement, and commissioning of a solar generating system, it will fall under ‘Works Contract Services’. In this case, 12% GST will be applicable on 70% of the total contract value and 18% on the remaining 30% value. So, we can say that tax incidence on goods is at 12% and services are at 18%.

Exemptions available for solar power based devices and systems

Under GST, no exemptions are provided to renewable energy devices and parts of their manufacture. All the renewable energy devices covered under Chapter 84, Chapter 85 and Chapter 94 are charged at 12% GST. 

GST rates and HSN or SAC codes for solar power based devices and systems

Edit
HSN codeDescriptionSGSTCGST
8419 12Solar water heater and system2.50%2.50%
85Solar power generating system6%6%
8504Solar inverter6%6%
85Solar lantern/solar lamp6%6%
85414011Solar panels6%6%
84, 85 or 94Solar power based devices6%6%
9954, 9983, 9987Composite supply of goods along with the supply of construction services of the solar power plant70% of the value is considered as supply of goods and taxed at 12% of GST

Balance 30% of the contract value is considered as supply of services and taxed at a standard tax rate of service which is 18%.
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