1. GST IMPACT ON
SOLAR POWER PROJECTS

2. OBJECT AND PURPOSE To provide an overview of GST
To discuss the overall impact of GST
To discuss the impact of GST on cost of procurement
To discuss the key challenges and concerns under GST
Way forward options

3. OVERVIEW OF PREVIOUS
INDIRECT TAXES

4. PREVIOUS INDIRECT TAXES TAXABLE EVENT - PREVIOUS INDIRECT TAX
REGIME
Central Levies
State Levies
Basic Customs Duty (BCD)
VAT/ Purchase Tax
TAX/DUTY
TAXABLE EVENT
BCD, CVD, ACD
Import of goods
Excise Duty
Manufacture of goods
Service Tax
Import and domestic provision of services
Sales Tax/VAT
Intra state sale of goods
CST
Inter state sale of goods
Octroi/Entry Tax
Entry of goods into notified areas
Additional duties of customs – in lieu of excise (CVD) and in lieu of VAT (ACD)
Octroi/Entry Tax
Other Cesses and Surcharges
Excise Duty
Service Tax
Central Sales Tax (CST)
Other Cesses and Surcharges

5. LEVIES UNDER THE PREVIOUS INDIRECT TAX REGIME

6. TRANSACTION MECHANICS - PREVIOUS LEVIES
BCD-Cost
ACD-Cost
CVD- Cost
Entry tax- Cost
Inward Supplies
Import of plant and machinery
BCD- Cost
CVD- Cost
SAD in lieu of VAT – Cost
Entry Tax- Cost
Plant and machinery from domestic market
Central Excise duty- Cost
VAT- Creditable
CST- Cost
Procurement of services (onshore / offshore)
Service tax on procurement of manpower, transportation, technical know-how. etc.- Creditable
Procurement of Civil works/Works Contract Services
Service tax on the service component- Creditable
VAT on the sales component- Creditable
Outward Supplies
Supply of Civil works/Works Contract Services
Service tax on the service component
VAT on the sales component
Service tax- Creditable
Goods
Services
Offshore
Onshore
Excise duty- Cost
VAT-Creditable
CST- Cost
Entry Tax- Cost
Service tax- 40% of the Contract Value
VAT/CST- 70% of the Contract Value
Goods
EPC Firm
Project Site
Value of Goods involved in execution of works contract is assumed as per Maharashtra VAT Act.
Services
Sub Contractor
Service tax- Creditable
Service tax- 40% of the Contract Value
VAT- 75% of the Contract Value

7. EXEMPTIONS/CONCESSIONS TO SOLAR POWER EQUIPMENTS
UNDER PREVIOUS REGIME
Nil Excise duty on manufacture of all items of machinery etc. required for initial setting up of a Solar power generation plant
Nil CVD & SAD on import of all items of machinery etc. required for initial setting up of a Solar power generation plant
5% BCD on import of all items of machinery etc. required for initial setting up of a Solar power generation plant
Nil VAT on Solar Power generating Systems
6% VAT on Solar Cells
SOLAR
**VAT Exemption/Concessions are based on Maharashtra Value Added Tax Act

8. CHALLENGES UNDER THE PREVIOUS TAX REGIME
Multiplicity of taxes and various trigger points for levy leading to a complex tax structure.
Cascading effect i.e. tax on tax paid on goods. VAT / CST is paid on a value inclusive of excise duty.
No smooth flow of credit. Excise duty paid on inputs cannot be set off against VAT or service tax and vice versa.
Different rates of State taxes. Octroi / Entry tax additional burden
Double taxation of works contracts

9. OVERVIEW OF GST

10. What is Goods and Service Tax?
A comprehensive levy to tax supply of goods and services
Two-tiered tax regime
Destination based consumption tax
GST does not differentiate between treatment of ‘Goods’ and ‘Services’
Levied on the value add at each stage of supply
What is Goods and Service Tax?

11. SINGLE TAXABLE EVENT UNDER GST LAW
TAXES SUBSUMED
SINGLE TAXABLE EVENT UNDER GST LAW
Supply of Goods and/ or Services
Inter State sale of goods
Provision of Service
Manufacture of Goods
Import of Goods and Service
Intra State sale of goods
Central Levies
State Levies
Excise Duties including the additional excise duties
VAT/ Sales Tax
Octroi / Entry Tax
CST
Cesses and surcharges levied by States, related to supply of goods
Additional Duties of Customs (i.e. CVD and ACD)
Cesses and surcharges levied by Union
Service Tax

12. NATURE OF LEVY COMPONENTS OF GST
Levy on inter state supply of goods or services or both
IGST
Levy on supply of goods or services or both within a particular State by Central Government
CGST
Levy on supply of goods or services or both within a particular State by State Government
SGST
Levy on supply of goods or services or both within a particular Union Territory
UTGST
CGST
Intra State supply
SGST/ UTGST
Inter State Supply
IGST

13. TRANSACTION MECHANICS – GST TRIGGERS
Inward Supplies
Import of plant and machinery
BCD- Cost
IGST – Creditable
Plant and machinery from domestic market
CGST & SGST – Creditable
IGST - Creditable
Procurement of services (onshore / offshore)
CGST & SGST - Creditable
Procurement of Civil works/Works Contract Services
Outward Supplies
Works Contract Services
CGST & SGST
BCD-Cost
IGST- Creditable
IGST- Creditable
Goods
Services
Offshore
Onshore
CGST&SGST or IGST Creditable
CGST&SGST
Goods
EPC Firm
Project Site
Services
Sub Contractor
CGST&SGST or IGST Creditable
CGST&SGST or IGST
Creditable

14. Supply of Goods and/ or Service
RATE STRUCTURE
Supply of Goods and/ or Service
Nil
Zero rated 5%
12%
18%
28%
Levy of Compensation Cess
Tobacco
Pan Masala
Coal, Lignite and Peat
Motor Vehicles

15. GST RATE – SOLAR POWER SECTOR GOODS & SERVICES5%
Solar Modules
All other solar power generating systems
Spare parts for solar power generating systems

16. COMPARITIVE COST ANALYSIS –
PREVIOUS REGIME V/S GST

17. Credit available as set off
Supply under the Previous regime
Input taxes
Import Value-Goods
100
Import/Domestic Service
Domestic procurement
Civil Works 5
Service 14
Excise
Service on 40% Contract Value
5.6
.5%
0.5 2% 2
on 40%
0.2
NIL
.5%
Entry
4.08
.5% on 40%
on 75%
10.13
Total
105
115
106.08
116.13
Output Works Contract
Total Cost
411.78
Tax Cost
Credit available as set off
20%
82.36
Taxable Amount
494.14
on 75% value
22.24
Input
11.78
Service tax
19.6
Service Tax on 40% 15%
29.64
Output
51.88
KKC
0.7
TOTAL COST OF PROJECT- Rs
VAT
546.02
63.66
30.43
Under Maharashtra VAT, 2% TDS was required to be deducted from amount payable to a Registered dealer and 5% on payment to unregistered dealer

18. Supply under the GST Regime
Input taxes
Import Value-Goods
100
Import/Domestic Service
Domestic procurement
Works Contract 5 18
5% or CGST & each 9% 9 5%
5.25 9%  9
Total
110.25
118
105
Output Works Contract
Total Cost
405
Tax Cost
Credit available as set off
TOTAL COST OF PROJECT= Rs
20% 81
Input (BCD)
5.00
IGST
46.25
Taxable Amount
486
Output
87.48
43.74 9%
INCREASE IN COST= 5% (approx.)
573.48
92.48
TDS Rates
Under GST, TDS at 1% is provided where the total value of supply to Government of local authorities exceeds 2.5 lakhs.
No TDS is required to be deducted where State of supply is different from State of registered recipient.

19. KEY CONCERNS
High rate of GST at 18 per cent on output, when treated as works contract though solar projects involve predominantly goods charged GST at 5 per cent
Higher tax cost under GST is not creditable by project owners since electricity is kept out of GST. Hence, the entire GST would become a cost.

20. WAY FORWARD
Tax planning –split method for procuring goods and services separately to mitigate GST impact
Re-negotiation of contracts / invocation of change in law clause to pass on the higher GST cost
Review of vendor contract to incorporate clauses to indemnify the recipient in case of non payment of tax by the supplier
Contractors / project owners to analyse tax liability for all ongoing projects in line with transition provision
Amendment to existing contract clauses to include any interest, penalty on late payment or under contract, payable along with applicable GST.

21. Thank You