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The world is moving towards renewable energy, and solar power is at the forefront of this movement. Governments around the world are encouraging the use of solar power by providing various incentives and subsidies. One such incentive is the Goods and Services Tax (GST) levied on solar power generating systems. The Harmonized System of Nomenclature (HSN) code is used to classify goods for taxation purposes. In this article, we will discuss in detail the HSN code and GST rate applicable to solar power generating systems in India.

HSN Code for Solar Power Generating System

The HSN code for a solar power generating system in India is 8541. The HSN code 8541 includes solar cells and solar modules/panels. This code is used for the classification of solar cells and modules, whether or not assembled in modules or made up into panels.

HSN Code 8541 Details

• 8541 40 11: This code is used for solar cells not assembled.
• 8541 40 12: This code is used for solar cells assembled in modules or made up into panels.

It is important to note that the HSN code is based on the nature of the goods and is universally accepted worldwide.

GST Rate on Solar Power Generating System

The GST rate on solar power generating systems is 5%. This rate is applicable to both solar cells not assembled and solar cells assembled in modules or made up into panels. However, there is a condition attached to this rate. The 5% GST rate is applicable only if the supply of goods and services is made for the setting up of a solar power generating system.

GST Rate Details

• 5% GST: Applicable to the supply of goods and services required for setting up a solar power generating system. This includes the supply of solar cells not assembled and solar cells assembled in modules or made up into panels.

It is important to note that if the supply of goods and services is not for setting up a solar power generating system, the GST rate applicable will be different. For example, if the solar panels are supplied for any other purpose other than setting up a solar power generating system, the GST rate applicable will be 18%.

Input Tax Credit on Solar Power Generating System

Input Tax Credit (ITC) is a mechanism under the GST regime that allows a taxpayer to claim credit for the GST paid on the purchase of goods and services used for the supply of taxable goods and services. The ITC can be claimed by the supplier of the solar power generating system on the GST paid on the purchase of goods and services used for setting up the solar power generating system.

Conditions for Claiming ITC

• GST Registration: The supplier must be registered under GST.
• Tax Invoice: The supplier must have a tax invoice or a debit note issued by a registered supplier.
• GST Return: The supplier must have filed the GST return.

It is important to note that the ITC claimed by the supplier will be matched with the details provided by the supplier in the GST return. If there is any discrepancy, the ITC claimed will be disallowed.

Conclusion

The HSN code and GST rate applicable to solar power generating systems play a crucial role in the promotion of solar energy in India. The government has provided a concessional GST rate of 5% on the supply of goods and services required for setting up a solar power generating system. This concessional rate is aimed at reducing the cost of setting up a solar power generating system and promoting the use of solar energy. Additionally, the Input Tax Credit mechanism under the GST regime allows the supplier to claim credit for the GST paid on the purchase of goods and services used for setting up the solar power generating system, further reducing the cost.

It is important for the suppliers and buyers of solar power generating systems to be aware of the HSN code and GST rate applicable to ensure compliance with the tax laws and avail the benefits provided by the government.