Infrastructure & construction industry under GST

Infrastructure & construction industry under GST

After the introduction of GST, various industries are affected due to it. Let us discuss the situation of Infrastructure & construction industry under GST.

Introduction

The Government of India has identified infrastructure and construction as the key drivers for the economic growth of the country and major investment is planned in this sector under the current plan.

Airports, roads, ports, and railways including metro/mono play the pivotal role in improving the infrastructure of the nation. Similarly, trade/ convention centers, stadiums, residential complexes are being constructed across the country. Thus, the construction sector provides major employment opportunities to the citizens of the country.

The changes in the GST Act and Rules will substantially increase the ease of doing the business in the country. It is pertinent to note that GST amendments reduce the cascading effect of tax by allowing seamless credit. Also, it will increase compliance across the value chain very effectively. It is important that GST Act/Rules are modified suitably so that it facilitates the business and reduces legal hassles. This will enable the business houses to focus on a productive future.

This proposal will help the infrastructure /construction industry and make compliance easier for the industry.

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1. Withdrawal of concessions/exemptions to solar power projects

Power is one of the key requirements for infrastructure development. The Government of India through Ministry of New and Renewable Energy (MNRE) is playing a proactive role in promoting the adoption of renewable energy resources by offering various incentives such as generation-based incentives (GBI’s), capital and interest subsidies, viability gap funding (VGF), concessional finance, fiscal incentives etc.

The National Solar Mission aims to promote the development and use of solar energy for power generation and other uses, with the ultimate objective of making solar energy compete with fossil-based energy options.

In pre- GST regime exemption was accorded from payment of excise duty for all equipment, instruments etc. required for initial setting up of Solar Power Project or facility as per CE Notification No.15/2010 dated 27.02.2010 – Central Excise. Under GST there is a levy of tax ranging from 5% to 18% on different equipment and instruments as detailed below:

a. GST rate for solar energy system falling under Chapter 85.41 – 5%
b. Other than the above GST rate is 18% e.g., inverters, cables etc.,

Predominantly, goods required for Solar projects attract GST levy @ 5%.

For the development of solar renewable energy project, generally, the solar system can be installed in the civil foundation. Since the system is installed in civil works, the field formation may treat it as works contract service in relation to immovable property and levy GST at 18%. This leads to an increase in cost for the project.