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New GST rate to cloud future solar power projects, says report

The new 5 per cent rate proposed on solar PV cells and modules under the GST regime will cloud future…

New GST rate to cloud future solar power projects, says report

Representational Image (PHOTO: Getty Images)

The new 5 per cent rate proposed on solar PV cells and modules under the GST regime will cloud future solar power projects, according to ICRA Ratings.

According to the report, the new rate is expected to have marginally negative impact on new solar power projects due to an increase in capital cost arising from higher tax rate applicable under the GST.

Sabysachi Majumdar, Group Head & Senior Vice President, ICRA Ratings, said, “With 5 per cent GST rate, the impact on capital cost for new solar power projects is estimated to be limited at about 6 per cent, which would thus translate into an increase in levellised cost of generation by 11-12 paise per unit for such projects.”

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He stressed that the developers would incur a higher capital cost for the already undergoing solar projects under the competitive bidding route in last six-month period against the cost envisaged at the time of bidding.

ICRA Ratings also mentioned that the solar project awards in last 5-6 month period stood at about 2.5-3 GW mainly under NSM and state policy route, wherein, competitively bid tariffs have fallen significantly as seen from the decline of 45 per cent i.e. from Rs.4.4/kwh in November 2016 to Rs.2.44/kwh in bidding done in May 2017 for projects in Badla Solar Park in Rajasthan.

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