India’s Energy Transition

India’s Energy Transition: The Impact of the Goods and Services Tax on Solar Photovoltaic and Coal Power Costs March 2019 Written by Abhinav Soman, Neil McCulloch, Harsimran Kaur and Christopher Beaton IISD.org/gsi iii India’s Energy Transition Acknowledgements The authors of this issue brief would like to thank the following individuals and institutions for the valuable comments and recommendatio [...] A lack of data on the fixed costs of new coal plants makes it impossible to calculate the impact of the GST on the overall cost of new coal plants. [...] The GST Council has now stated that 70 per cent of the gross value of a contract shall be considered as supply of goods and attract 5 per cent GST, while the remaining 30 per cent of the aggregate value will be treated as supply of services with 18 per cent GST as the applicable rate (PIB, 2018). [...] Thus, while in the previous tax regime the higher tax rate (service tax at 15 per cent) applied to 17 per cent of the capital costs and modules were exempt from taxes, under GST 30 per cent of the capital costs attract the higher GST rate (18 per cent GST) and the remainder is taxed at 5 per cent GST. [...] Figure 3 shows the percentage reductions in the coal component of the LCOE as well as the reduction in the overall LCOE.