Government of India notifies uniform GST rate for “All Solar Cookers”
On July 12th, 2024, the Central Board of Indirect Taxes and Customs (CBIC) issued Notification No. 02/2024-Integrated Tax (Rate) announcing some important changes in the Goods and Services Tax (GST) rates for goods. One significant change notified is the reduction in the GST rate for solar cookers. These eco-friendly cooking devices, whether single or dual energy source, will now attract a GST rate of 12% only. Solar cookers, which are devices that use sunlight as a source of energy for cooking, are generally considered under the broader category of solar energy equipment for GST purposes. Earlier there was no specific mention of solar cookers; it was billed under solar thermal device. If billed as cooking device it was attracting 18% GST. Now the ambiguity is removed. These changes reflect the government’s commitment to promoting use of green energy for household’s application, simplifying the tax structure, and also adoption of clean cooking.
The solar power sector is a fast-growing industry in India fuelled by environment concern and technological advancements. The government has set the national target of non-fossil fuel energy capacity at 500 GW to be achieved by 2030 and the government wants to achieve the target by promoting innovative solar projects. As part of this endeavour, the government has decided to tax all solar power based devices, either directly or indirectly powered by sunlight 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%. The recent changes in the GST rate is expected to ease the tax challenges and make renewable projects economically more competitive for businesses operating in renewable energy projects.
The announcement on GST rate has come at a time when the government is encouraging use of renewable, especially solar energy for household’s use with the launching of the PM Surya Ghar Muft Bijlee Yojana on 13th February, 2024. It is a Central Scheme that aims to provide free electricity to one crore households in India, who opt to install roof top solar electricity unit. The scheme provides a Central Financial Assistrance (CFA) of 60% of system cost for 2 kW systems and 40% of additional system cost for systems between 2 to 3 kW capacity. The households will be able to get 300 units of electricity free every month. These initiatives along with endorsement of “Surya Nutan” a twin-top solar cooking stove developed by the Indian Oil Corporation (IOC) by the Hon’ble Prime Minister of India at the India energy week 2023 and followed by efforts by IOC to upscale its production to reduce the upfront cost are important milestones on the path to accelerate transition to clean cooking in India