Why Are There Higher Taxes on Storing Renewable Energy After GST?

With the highest tax bracket on batteries, how does the government plan to incentivise green energy?

(Photo: Harsh Sahani/The Quint)

The government says they want to promote green energy but then why are our GST rates not environment friendly? Under GST, batteries to store renewable energy storage have been put into the highest tax brackets (18 and 28 percent).

Renewable energy – like solar and wind – isn’t always available, and storage batteries are the way out.

The government has placed all the equipment for renewable energy in the 5% tax bracket but batteries in the 18% and 28% bracket, how does that work?

“Green energy generation needs to be followed by storage to ensure continuous supply of electricity,” says Debi Prasad Dash, Director of the Indian Energy Storage Alliance (IESA). On 10 July, the IESA wrote to the Power Minister Piyush Goyal to lower the Goods and Services Tax levy on batteries.

‘High Taxes are Counter Productive’

Experts across the board say that if you want to expand renewable energy, then you have to lower taxes.

Aruna Kumarakandath from the Centre for Science and Environment called expensive batteries a hurdle in the expansion of green energy.

Considering the present government has set itself an ambitious goal of achieving 175 GW of renewable energy by 2022, the high taxation is discouraging. Storage has to get cheaper.

Aruna Kumarakandath, Centre for Science and Environment

(Image: The Quint)

Amit Kumar, Sr Director, The Energy and Resource Institute (TERI) said the numbers don’t add up.

The fact is whether we are talking about large solar plants, micro grids or rooftop solar panels, one cannot do without storage batteries.

‘Will Lose Manufacturing Race To China’

Experts say solar energy in India still focuses on generation instead of storage, which means policymakers tend to ignore the latter.

Green energy generation will grow exponentially in the next five years. So there is a need to be ready with adequate and affordable storage technology and capacity. And the time to act (read incentivise, for GST gurus), is now.

Rahul Walawalkar, Executive Director, India Energy Storage Alliance said there is no logic whatsoever in the government’s move, calling it ‘ignorance’.

(Image: The Quint)

‘Prices Will Increase’

Amit Kumar from TERI says costlier batteries will increase costs across the board.

The tax on domestically produced batteries was between 12 and 18 percent. Since it is now up to 28 percent, it is bound to push up prices, says Debi Prasad. For imported goods, the confusion over GST rates continues, Prasad added.

Depending on the subsidies each country offers, the rate to import batteries differs from 22 percent to 32 percent. With GST’s implementation there is confusion about the custom duties we will have to pay in addition to the 28 percent

Dr Walawalkar says the government is unnecessarily creating differentiation between components of green energy. “Generation and storage has to go hand in hand.”

The initial confusion regarding GST rates on components of renewable energy was cleared – by bringing them under a single tax slab of 5 percent. Will they do the same with batteries?

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