Page 5 - Tax Regime for Improved Cookstoves and Its Implications
P. 5
TERI Policy Brief
Table 1: A snapshot of VAT rates for improved coosktoves in few states the local population for the cheaper cookstove. TERI
also interviewed many households who stated that
State VAT rate they would be more inclined to buy the improved
cookstoves, if the price fell by 10%–15%.
Andhra Pradesh 5% for RE devices and spare parts (not clear)#
Recommendations
Arunachal Pradesh 4% for RE devices and spare parts (not clear)
Automatic exemption of excise duty and central
Bihar+ 13.5% sales tax for all improved cookstove models as
soon as they are approved by the MNRE for at
Goa 5% least five years that will be valid ipso facto. Further,
as currently the cookstove sector is at a nascent
Haryana 5.25% (not clear) level of growth, the current tax collection from
ICs is insignificant.
Himachal Pradesh+ 13.75%
New notification clarifying that Central Sales
Karnataka 5% for RE devices and spare parts (not clear) Tax waiver extends to components as well, like
fan, battery, and other accessories for all new
Kerala 5% generation cookstoves.
Madhya Pradesh+ 13.5% Complete exemption of state taxes (VAT and state
border entry tax) for MNRE approved ICs. Doing
Maharashtra 4% so will not only reduce cost of the product for the
end user but will also reduce the documentation
Meghalaya+ 5.25% burden related to the same thereby spurring the
interest of local NGOs and small entrepreneurs.
Odisha+ 13.5%
Punjab 5.5% (not clear)
Tamil Nadu Exempt from VAT
Tripura 5% for RE devices and spare parts (not clear)
Uttarakhand Exempt from VAT
Uttar Pradesh+ 12.5%
Source: TERI compilation based on VAT rates specified in the VAT schedules
of states
+Based on TERI’s project experience in these states
#Not clear whether cookstoves come under the category of renewable energy
devices and spare parts.
*TERI is in talks with the Government of Meghalaya, Himachal Pradesh and
Odisha to make improved biomass cookstoves tax exempt in the state.
cookstoves had a higher uptake. As opposed to 445
cookstoves of RBS, only 123 NDMI cookstoves were
sold in the state, clearly indicating the preference of
Table 2: Illustrative example showing tax-break up for cookstove manufacturer located in Gujarat under two scenarios
Particulars Sale in Gujarat Sale in Odisha
2400
Stove sale price Factory gate price in manufacturer’s state 2400 36
Central sales tax Applicable to inter-state shipment only 0 2436
(0% in Gujarat, 1.5% in Odisha) 48
Distributor payment to manufacturer per stove 2400 2484
248
Entry tax Not applicable in Gujarat, 2% in Odisha 0
2732
Distributor’s investment on stoves 2400 376
Distributor’s margin Assumed to be @ 10% 240 3108
410
Product cost before VAT at distributor’s end 2640
3142
VAT charged for within state transaction from (@5% in Gujarat, @13.75% in Odisha) 132 432
distributor to EE 3574
Entrepreneur payment to distributor 2772
EE margin Assumed to be @ 15% 396
Product cost before VAT at EE end 3036
VAT 152
Total cost at EE’s retail outlet 3188
Source: TERI
References
Singh A and Pathy S. 2012. Promoting advanced cookstoves through a sustainable partnership between a microfinance institution and a
syndicated distribution network. USAID India.
The Boston Consulting Group (BCG). 2013. Ahead of the Curve: Lessons on Technology and Growth from Small Business Leaders. Boston, USA: The Boston
Consulting Group (BCG).
ISSUE 13 SEPTEMBER 2014 5
Table 1: A snapshot of VAT rates for improved coosktoves in few states the local population for the cheaper cookstove. TERI
also interviewed many households who stated that
State VAT rate they would be more inclined to buy the improved
cookstoves, if the price fell by 10%–15%.
Andhra Pradesh 5% for RE devices and spare parts (not clear)#
Recommendations
Arunachal Pradesh 4% for RE devices and spare parts (not clear)
Automatic exemption of excise duty and central
Bihar+ 13.5% sales tax for all improved cookstove models as
soon as they are approved by the MNRE for at
Goa 5% least five years that will be valid ipso facto. Further,
as currently the cookstove sector is at a nascent
Haryana 5.25% (not clear) level of growth, the current tax collection from
ICs is insignificant.
Himachal Pradesh+ 13.75%
New notification clarifying that Central Sales
Karnataka 5% for RE devices and spare parts (not clear) Tax waiver extends to components as well, like
fan, battery, and other accessories for all new
Kerala 5% generation cookstoves.
Madhya Pradesh+ 13.5% Complete exemption of state taxes (VAT and state
border entry tax) for MNRE approved ICs. Doing
Maharashtra 4% so will not only reduce cost of the product for the
end user but will also reduce the documentation
Meghalaya+ 5.25% burden related to the same thereby spurring the
interest of local NGOs and small entrepreneurs.
Odisha+ 13.5%
Punjab 5.5% (not clear)
Tamil Nadu Exempt from VAT
Tripura 5% for RE devices and spare parts (not clear)
Uttarakhand Exempt from VAT
Uttar Pradesh+ 12.5%
Source: TERI compilation based on VAT rates specified in the VAT schedules
of states
+Based on TERI’s project experience in these states
#Not clear whether cookstoves come under the category of renewable energy
devices and spare parts.
*TERI is in talks with the Government of Meghalaya, Himachal Pradesh and
Odisha to make improved biomass cookstoves tax exempt in the state.
cookstoves had a higher uptake. As opposed to 445
cookstoves of RBS, only 123 NDMI cookstoves were
sold in the state, clearly indicating the preference of
Table 2: Illustrative example showing tax-break up for cookstove manufacturer located in Gujarat under two scenarios
Particulars Sale in Gujarat Sale in Odisha
2400
Stove sale price Factory gate price in manufacturer’s state 2400 36
Central sales tax Applicable to inter-state shipment only 0 2436
(0% in Gujarat, 1.5% in Odisha) 48
Distributor payment to manufacturer per stove 2400 2484
248
Entry tax Not applicable in Gujarat, 2% in Odisha 0
2732
Distributor’s investment on stoves 2400 376
Distributor’s margin Assumed to be @ 10% 240 3108
410
Product cost before VAT at distributor’s end 2640
3142
VAT charged for within state transaction from (@5% in Gujarat, @13.75% in Odisha) 132 432
distributor to EE 3574
Entrepreneur payment to distributor 2772
EE margin Assumed to be @ 15% 396
Product cost before VAT at EE end 3036
VAT 152
Total cost at EE’s retail outlet 3188
Source: TERI
References
Singh A and Pathy S. 2012. Promoting advanced cookstoves through a sustainable partnership between a microfinance institution and a
syndicated distribution network. USAID India.
The Boston Consulting Group (BCG). 2013. Ahead of the Curve: Lessons on Technology and Growth from Small Business Leaders. Boston, USA: The Boston
Consulting Group (BCG).
ISSUE 13 SEPTEMBER 2014 5
