Renewable energy developers are prompting the government to lessen the Goods and Services Tax (GST) on standalone utility-scale or containerised battery energy storage systems (BESS) from 18 percent to 5 percent. This reduction would align the tax rate with that of other equipment used in renewable energy projects, such as solar modules, and would support faster deployment of these systems.
The National Solar Energy Federation of India has submitted a written representation to the Ministry of Renewable Energy, expressing concerns that the higher GST rate is making solar projects less competitive. This issue arises alongside growing worries about the curtailment of green energy during solar hours, which could be mitigated through the addition of energy storage.
“A reduction in GST on BESS could translate into a saving of approximately ₹0.25-0.41/unit in the levelised cost of storage (LCOS),” the federation said in the letter
The Federation emphasises that Battery Energy Storage Systems (BESS) should be regarded as generation assets, similar to solar modules and wind turbines. They are requesting that the current concessional GST rate of 5% be extended to BESS containers, including battery cells.
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Typically, battery containers account for approximately 85-90% of the total cost of a BESS. Granting this concession would allow BESS projects to be classified as composite contracts, akin to solar and wind power projects. This change would ease project implementation and enhance commercial viability.
The Central Electricity Authority has projected a need for 411.4 GWh of energy storage capacity by 2032, consisting of 175.18 GWh from pumped storage projects and 236.22 GWh from BESS.
Given the substantial potential for deployment, reducing the levelized cost of storage could yield an estimated net present value benefit of around ₹24,000 crore, which surpasses the estimated GST revenue foregone of nearly ₹20,000 crore, as stated in the letter.
Source: https://a2ztaxcorp.net/reduced-5-gst-sought-on-battery-energy-storage-system-in-containers/
