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No Customs Duty for Imported solar equipment

India Solar Power Products Market

The Central Board of Indirect Taxes and Customs (CBITC) has made it clear that the bulk of imported solar panels and modules will not attract customs duty as 90% of panels used in Indian solar projects are imported.

India: The Central Board of Indirect Taxes and Customs (CBITC), much to the relief of solar project developers, has recently explained that the majority of imported solar panels and modules will not attract customs duty, putting to rest a controversy that has been going on for more than six months. Around 90% of panels used in Indian solar projects are imported.

In September 2016, the CBITC ordered that since solar panels and modules generate power, they should be classified along with electrical motors and generators under the Customs Act (HS Code 8501), which attract 7.5% import duty, apart from different types of cess, up to a total of around 10%. The implementation began in the middle of 2017. Till then, solar equipment was always grouped with “diodes, transistors and similar semiconductor devices, photosensitive semiconductor devices,” etc., (HS Code 8541) whose import was free.

CBITC, in an official statement has now clarified that solar panels or modules equipped with bypass diodes will be classifiable in heading 8541 while solar panels or modules equipped with blocking diodes as well as those with blocking diodes and bypass diodes would be classifiable in heading 8501.

Solar developers have maintained that most of the solar equipment that is imported in India are with bypass diodes and will not attract duty. The reclassification became an issue for solar developers with solar imports being held back at Chennai port initially and later at all ports across the country, unless the duty was paid. By the end of October 2017, over 1,000 containers of solar equipment had heaped up at Chennai port, with developers challenging the duty charged.

Initially, both developers and the Ministry of New and Renewable Energy (MNRE) believed it to be a misunderstanding, but after customs officials refused to change their stand, both the MNRE minister and secretary took up the matter with the finance ministry. It was pointed that the duty would increase the solar developers’ costs, thereby increasing solar tariffs, which has been falling steadily for the past few years. They also noted that increasing the cost would hinder the achievement of Prime Minister’s ambitious target of 100,000 MW of installed solar capacity by 2022. Several developers even began paying the tax asked in order to clear their goods.

In December 2017, the secretary for finance wanted to continue with the import duty, noting that solar imports were already subject to investigations by Directorate of Anti-Dumping and Allied Duties. The MNRE received an assurance that solar equipment for projects already bid for or partially built would be exempted, because imposing duty would render the projects unviable at the tariffs that had been determined. However, the finance ministry clearly seems to have change their mind on the same.

According to TechSci Research, the move by CBITC will unleash enormous potential for the Solar Power as well as Solar Rooftop Market in India. The increasing government focus on development of renewable energy sector, the solar power products market is expanding at a high rate. The government has set the target at 100GW for solar power generation capacity by 2022, which is expected to increase development of solar power products in India. The increasing initiatives adopted by the Government like incentives and subsidies for solar pumps and solar lanterns, are boosting the adoption across the country. Additionally, development of solar rooftop PV plants is being supported by various adopting various measures like Feed-In Tariff, Accelerated Depreciation Mechanism, Generation Based Incentives, etc., which will propel the India solar rooftop PV market in the coming years. Rising development of solar power generation projects is expected to aid in addressing the growing demand for electricity and in turn boost growth in the solar power products market through 2022.

According to the recently published report by TechSci Research, India Solar Power Products Market By Product Type, Competition Forecast & Opportunities, 2012 - 2022”, the market for solar power products in India is forecast to grow at a CAGR of over 10% through 2022, on account of growing demand for power and increasing focus on reduction of greenhouse gases emissions from the power sector. Development of power transmission and distribution network is projected to increase adoption of grid connected rooftop solar plants in the country through 2022. In addition, implementation of Net Metering Policy across various states in the country is anticipated to boost grid connected solar rooftop plant developments, as it aids in exporting additional energy back to the grid. The government has also formulated policies specific to end users of rooftop solar plants i.e. residential, commercial and industrial segments to promote installation of rooftop solar plants across the country. Government of India is also promoting use of other solar power products such as solar water pumps to address the growing drinking water and irrigation requirements in agriculture sector.

According to the recently published report by TechSci Research, India Solar RooftopMarket, By State (Delhi, Gujarat, Haryana, Madhya Pradesh, Maharashtra, Punjab, Rajasthan, Tamil Nadu) By End User (Commercial, Industrial, Residential) By Connectivity (On-Grid, Off- Grid) Forecast and Opportunities, 2021”, the solar rooftop market in India to grow at a CAGR of over 60% during 2016 - 2021. In India, the solar power market is in its developing stage, and numerous measures are being taken by the government to promote the use of solar energy in the country. In order to map the solar potential in the country, the Ministry of New and Renewable Energy (MNRE), a nodal Ministry of the Government of India for all matters relating to new and renewable energy, has installed 51 Solar Radiation Resource Assessment (SRRA) in the country to calculate the solar potential. In 2015, on-grid solar rooftop segment dominated the India solar rooftop market, and the segment is expected to maintain its dominance over the next five years as well.


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