Manufacturers of solar water heaters are worried that high GST rates may edge them out of competition. Already they have to pay 5% VAT in Gujarat, while manufacturers in states like Maharashtra and Karnataka do not have to pay any VAT at all. With cheap solar water heaters from China flooding the market Gujarat-based solar water heater manufacturers are hard pressed already, and now the uncertainty of GST is affecting them.
“If the GST rate is above the prevailing VAT then it is likely to affect business development as tax exemptions are major drivers of investments in the sector,” said Jaideep Malaviya, secretary general, Solar Thermal Federation of India (STFI). STFI feels that that the relatively small solar thermal sector has a strong case for exemption from GST. Currently, solar water heaters are exempted from excise duty.
Domestic manufacturers are finding it tough to compete with solar geysers from China as the neighbouring country offers 17% incentive to its exporters on completely-built systems. “A locally made solar water heater with a capacity of 200 litres costs Rs21,000 per unit, while a system with the same capacity imported from China is available at Rs.13,000. It will be a survival challenge for us if GST rate for this product is kept 10% or above,” said Regal Ghetiya, founding partner of Gondal-based Redsun Solar Industries.
The market for solar water heating systems in India is estimated to be Rs1,000 crore.
“If GST is higher than current VAT rates then we may not be able to absorb that increase,” said R Sethuraman of Solar Hi-tech Geysers.