No customs duty on imported solar cells and modules, says ministry

The domestic solar manufacturing industry in a petition has now asked the Centre to consider extending the duty beyond two years
The Ministry of New and Renewable Energy (MNRE) clarified that the basic customs duty (BCD) on imported solar cells and modules would remain nil in the current financial year.

In this year's Union Budget, two new item heads were inducted in the customs duty bracket which pertained to solar cells and modules. The Budget proposed a 20 per cent BCD on solar equipment. However, these items will continue at ‘nil’ BCD,” according to the budget speech.

The announcement led to confusion with the industry claiming that solar equipment is exempted from BCD. Solar cells and modules (under item number 8541) are exempted from any BCD, according to a 2005 notification of the department of revenue.

MNRE in its notice issued on Thursday said solar will not attract any BCD. “Though the tariff rate on the new tariff items has been increased from nil to 20 per cent, the BCD on (solar cells, not assembled) and (solar cells, assembled in modules or made into panels), remains nil,” said the notice.

There is already a safeguard duty of 15 per cent levied on imported solar cells and modules, especially those coming from China. Senior officials said the if BCD would be imposed or not from next fiscal would be decided after the safeguard duty expires in July.

In 2018, the government announced imposition of safeguards duty on solar cells and modules for two years – 25 per cent in the first year, 20 per cent for six months, thereafter, and 15 per cent after that. The duty specifically impacted the exports coming from China, as more than 85 per cent of India’s solar capacity is built on Chinese panels.

The domestic solar manufacturing industry in a petition has now asked the Centre to consider extending the duty beyond two years. In a separate request, MNRE asked the finance ministry to impose Custom Duty on imported solar cells and modules, in a graded manner from 2021 onwards.

“Exemption for solar PV cells and modules/panels under ITA-I should only be allowed if they are used in Information Technology. For any other use such as production of solar power, BCD may be levied in a phased manner to encourage Make In India,” said the letter by R K Singh, union minister for power and MNRE, written in September 2019.

Sector executives said if BCD is imposed, the cost of imported solar equipment will go up in the range of 35-40 per cent. This likely could lead to solar tariff going up by to Rs 3 per unit, said an executive. Solar modules constitute 80 per cent of the cost of a solar power project.
  • India’s solar power generation capacity: 31,397 megawatt
  • India’s solar cells manufacturing capacity: 3,164 megawatt/annually
  • India’s solar module manufacturing capacity: 8,000 megawatt/annually
  • Solar cells import to India (2019-20 till yet) by value: $1.4 million

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