Tax Compliance Strategies for Solar Companies

The Treasury finally gave clarity on the Big Beautiful Bill (BBB). And if you’re running a solar company, here’s what you need to know: 1/ Residential solar is safe (through 2025). → The 30% tax credit remains for installs completed before the end of 2025. → The safe harbor (5% spend) option is still valid for sub-1.5MW projects. 2/ Commercial solar faces new limits. → For systems above 1.5MW, commence-construction rules tighten after September 2, 2025. → No more safe harboring for those larger projects after that date. → Expect closer scrutiny on paperwork and timelines. 3/ Financing tools remain in 2025, with caveats. → Leases, PPAs, and transfer credits are allowed → After December 31, 2025, only commercial/third-party ownership structures will be eligible for solar credits on new installs. 4/ Loan models are under pressure. → Solar loans have high interest rates. These loans are, in fact, unsecured, because few would take an entire solar system off a roof and thus demand a premium compared to loans on secured assets. → That makes traditional 25-year loan structures much less attractive for most homeowners. -- What does this mean for you? If you’re in residential, you still have a clear runway, but the clock is ticking. If you’re in commercial, you need to be buttoned up: tighter processes, trained teams, and diversified services. The takeaway is discipline, not panic. The installers who adapt early to these rules will both comply and build the trust and systems that last beyond the next policy cycle.

A judgment that every indirect tax professional advising on solar and renewable energy contracts must read. .. Tata Power Renewable Energies Ltd. is in the business of supplying Solar Power Generating Systems and Solar Power-based Devices and also provides related design, installation, testing, commissioning and maintenance services. For FY 2020-21, the company had been paying GST under the 70:30 valuation mechanism, 70% of gross consideration treated as value of goods taxable @ 5%, and 30% as value of services taxable @ 18%, resulting in an effective rate of 8.9%. These returns went entirely undisputed, until a Show Cause Notice dated 30.11.2024 was issued under Section 74 of the CGST Act, alleging evasion of tax. After the company's replies dated 24.12.2024 and 24.01.2025, an Assessment Order dated 06.03.2025 under Sections 74 and 74(9) confirmed a tax demand of ₹9,19,14,507 plus an equivalent amount as penalty, plus interest. .. The assessing authority took the view that since separate invoices had been raised for goods and services and different HSN codes had been used, the 70:30 split under Entry 234 and Entry 38 would not apply. On this basis, 18% was levied on the entire consideration. .. The Court was unequivocal. The explanations inserted into Entry 234 and Entry 38 by Notification No.24/2018 create a statutory legal fiction that in the supply of Solar Power Generating Systems, 70% of the price is deemed as value of goods taxable @ 5%, and 30% is deemed as value of services taxable @ 18%. This legal fiction applies regardless of whether the supply is made as one supply or as separate parts. Separate invoicing or differing HSN codes do not displace the applicability of these entries. The Court went further. Even if the Department's own characterisation of separate supplies were accepted, the authority was still required to separately ascertain the value of goods and the value of services before applying respective rates. That exercise was never done. Applying 18% on the entire turnover without any such breakdown was not sustainable. The Court's words were pointed: "the impugned order appeared to be an attempt to raise revenue for the state without applying its mind to the facts." The assessment was set aside to the extent of the differential tax levy. The petitioner remains liable to pay GST strictly as per the 70:30 mechanism set out in the explanations to the relevant notifications. The Court followed the earlier Division Bench ruling in Sterling and Wilson (P.) Ltd. v. Joint Commissioner, which had held such supply to be a composite supply of goods and services. The question of limitation was not examined, given the decision on merits. The 70:30 mechanism is a statutory construct with a clear legal basis. A notification prescribed deeming fiction cannot be undone by the form of billing. .. #TaxTalksWithAnish #GST #IndirectTax #SolarEnergy #RenewableEnergy #TaxLitigation #EPC #APHighCourt #CGST

Solar Compliance Simplified: A Business Guide to Navigating Regulations The solar energy landscape is rapidly evolving, with many businesses turning to solar power for cost savings and sustainability. However, understanding the regulatory and policy framework can be complex, especially for newcomers. This guide simplifies federal and state solar regulations, helping you make informed decisions. 1. Federal Policies and Incentives   - Investment Tax Credit (ITC): Provides a 30% tax credit on commercial solar installations, decreasing in the coming years.    - Modified Accelerated Cost Recovery System (MACRS): Allows depreciation of solar equipment over five years, adding to tax savings.   *Tip:* Consult a tax advisor to maximize these incentives. 2. State-Level Regulations and Incentives   - Renewable Energy Certificates (RECs): Earn credits for generating renewable energy, often tradable to offset installation costs.   - Net Metering: Offers credits for excess solar energy sent back to the grid, reducing electricity costs, though policies vary by state.   *Tip:* Check local incentives via the Database of State Incentives for Renewables & Efficiency (DSIRE). 3. Compliance and Permitting   - Zoning Laws: Verify solar installation compatibility with local zoning regulations.   - Permitting: Secure building and electrical permits, often requiring collaboration with experienced solar installers.   - Interconnection Agreements: Outline technical and cost requirements for connecting to the grid.   *Tip:* Partner with a knowledgeable solar installer to navigate local regulations smoothly. 4. Staying Informed   - Monitor Changes: Keep up with updates from energy departments and industry groups.   - Adapt: Adjust plans as new regulations or policies emerge.   *Tip:* Subscribe to industry newsletters or consult a solar energy expert for ongoing updates. Conclusion Navigating solar regulations can be challenging, but with the right knowledge, your business can effectively integrate solar power and enjoy its benefits. Understand incentives, comply with regulations, and stay updated to maximize your investment.

Battery Projects Are Safe.  Solar? You Need a Plan. The new OBBBA law brings big changes to solar tax credit eligibility—and you’ll need a smart strategy to get the most out of your solar goals. Key takeaways: • Battery energy storage projects are not affected; the ITC remains intact. • ITC ends for solar projects not placed in service by Dec 31, 2027—but only if construction starts after July 4, 2026. • Projects that start during the next 12 months have four years to be placed in service and receive the ITC. • “Placed in service” means a project is ready to operate. Utility interconnection is not required. • MACRS depreciation for solar energy property is eliminated but is replaced with permanent 100% bonus depreciation. • The IRC §48E Investment Tax Credit (ITC) remains intact for third-party leased commercial solar PV energy property. • New rules prohibit solar tax credit eligibility if “material assistance” is provided by a Chinese-owned entity, for projects that start construction after December 31, 2025. • Any new IRS guidance on the start of construction safe harbor, compelled by a White House executive order, is not likely to survive legal challenge if it adversely changes previously issued guidance. What to do now: • To preserve ITC eligibility, contract and spend at least 5% of eligible project costs ASAP. • Begin soft-cost activities like engineering or permitting. This strategy protects your project from legal and tax risk while preserving key incentives. Read the full breakdown here: https://lnkd.in/eV53tTug #solar #energystorage #taxcredits #cleanenergy #commercialsolar #renewables #projectdevelopment #energystrategy