The reduction of Goods and Services Tax (GST) on biogas plants and devices will boost private investment in the sector, the Indian Biogas Association said on Sunday.
The GST on biogas plants and devices has been cut to 5 per cent from 12 per cent, effective September 22.
The GST Council, comprising the Centre and states, last week decided to cut tax rates on 375 items and reduce the number of slabs to just 2 from 4 currently.
From September 22, a 5 per cent GST will be levied for most common-use goods and 18 per cent on everything else. The GST Council took a unanimous decision to do away with the 12 and 28 per cent slabs, the biggest rejig in 8 years since Goods and Services Tax (GST) was rolled out on July 1, 2017.
Biogas plants and devices should become cheaper and more accessible and more financially attractive for investment, said the Indian Biogas Association (IBA) in a statement.
A reduction of 7 per cent (from 12 per cent to 5 per cent) in the applicable GST rate for the CBG (compressed biogas) sector is expected to significantly improve project viability, and the direct impact would translate into 4-5 per cent increase (even on a conservative side) in new investments in the industry over the short to medium term. Indirectly, across the industry value chain, the multiplier effect would be much larger, it said.
By 2030, USD 4-5 billion of private investment is anticipated to be pumped into the Indian CBG industry.
This is in line with the goal for lowering the burden of tax on the rest of the green energy sources apart from biogas, such as windmills, solar-powered generators, solar lanterns and waste-to-energy systems.
The hope is that in combination with these devices, rural areas will more easily be able to access decentralised renewable energy.
The reduction of GST will lower the installation expenses.
“This reform will not only make biogas more accessible but also create jobs in manufacturing, installation, and maintenance,” Indian Biogas Association president AR Shukla said in the statement.
He even emphasised the fact that a complete value chain analysis needs to be done to understand the extent of impact at different levels.
“As a continued effort to make the CBG ecosystem more conducive, going forward, a special focus should be given to the upstream supply chain of components used in biogas plant equipment.
“Doing so shall address the issue of an inverted tax structure where inputs (subcomponents of CBG plant) attract higher GST than the finished/assembled equipment, which effectively is passed on to inflate the final project cost. Correcting this particular anomaly will make projects more viable and encourage large-scale adoption,” Shukla said.
The move can support a substantial increase in biogas projects throughout India, especially in the agriculture-focused regions, with a promise of relatively low-cost energy from organic waste.
The Indian Biogas Association is the first and largest nationwide and professional biogas association for stakeholders of the biogas industry, including technology providers, project developers, plant operators and planners of biogas plants, and representatives from public policy, science and research in India.
