India’s soaring solar sector has seen more than 4.8 GW of new capacity installed in the first six months of 2017 alone – already outstripping the 4,038 MW record of 2016, reports Mercom Capital Group.

The analysts expect India to add some 10,500 MW of solar in 2017, but warns that uncertainty over the Goods and Services Tax (GST) could see growth slow in 2018. “We have reduced the 2018 forecast by approximately 15% due to uncertainty surrounding GST rates, which has resulted in a slowdown in tenders and auctions,” said the Mercom Capital Report.

Solar modules are to attract a GST rate of 5%, but the government has flip-flopped over the tax rate for other solar components, initially stating that the 5% GST would apply to all solar-related products, but since stating that rates of either 18% or 28% would likely be levied. This means that many balance of systems (BOS) components such as inverters, storage and cabling could now attract the higher rate.

These additional costs, allied to the government’s inconsistency, have shaken confidence among investors – something that has been noted by the Ministry of New and Renewable Energy (MNRE), which is putting pressure on the finance ministry to levelized the 5% GST for all solar equipment.

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“Government agencies have created an environment of chaos and uncertainty surrounding these rates,” stated the Mercom Capital report. “It has brought auction and PPA signing activities to a standstill as nobody wants to move forward without knowing what the GST rates are going to be.”

The report also warns that record-low prices could also put the brakes on solar growth in 2018, with some developers adopting a wait-and-see approach as they hold back investment in the hope of achieving lower tariffs. This trend has already led to the cancellation, postponement and re-tendering of some solar capacity. According to the report, close to 1 GW of tenders were cancelled between April and June.