India Lowers Tax on Renewables in Steps to Fight Trump Tariffs

(Bloomberg) -- India more than halved a tax rate on domestic sales of renewable-energy equipment, as part of a raft of measures to shore up local consumption and shield the economy from punitive US tariffs.

Goods and services tax on equipment including solar panels and parts for windmills and biogas plants was reduced from 12% to 5%, according to the finance ministry, lowering costs for consumers and potentially accelerating capacity installations. The tax panel recommended the changes come into effect from Sept. 22.

“It sends a strong signal to investors, improving the financial viability and attractiveness of the renewable energy sector,” said Amit Paithankar, chief executive officer at Waaree Energies Ltd., among India’s largest exporters of solar panels to the US. 

The tax reduction — though designed mainly to soften the blow from tariffs on America’s imports of Indian goods — comes as India seeks to install record volumes of solar and wind energy to meet its climate goals for 2030 and beyond. The nation plans to double clean power capacity to 500 gigawatts by the end of the decade, and hit net zero by 2070.

The lower tax rate may prompt buyers of electricity from projects that are still under construction to demand a revision in power purchase agreements to take advantage of lower equipment costs, according to Saurabh Agarwal, partner for tax and new energy at EY India. 

But “the long-term positive impact of this policy — such as making renewable energy projects more affordable and boosting sector investment — far outweighs these initial challenges,” he said.

(AI summary was removed because of the incorrect attribution of a forecast.)

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