The renewable energy ministry of India has reportedly announced plans to start imposing a 40% customs tax on solar module imports from April 2022. This initiative has been taken with an aim to prevent the country’s reliance on foreign supplies and surge the domestic solar equipment manufacturing capabilities.

The finance ministry has issued the approval of the recent proposal. As per the ministry’s statement, the proposal includes a 25% customs duty on solar cell imports. The ministry, however, did not inform on how long the taxes will be applicable.

Initially, India had proposed taxes on the imports of solar power equipment in mid-2020, due to the mounting disruptions in the supply chain amid the COVID-19 pandemic, along with the India-China border tension. For the record, Chinese firms supply 80% of the solar modules to India.

According to the renewable power producer Amp Energy India’s country head, Pinaki Bhattacharyya, the high tax rates to be imposed are likely to impact both the distribution companies and consumers due to the possible rise in solar energy costs. He also expressed his belief that the solar energy sector would have gained numerous benefits if the government provided direct subsidies to the manufacturers.

In a bid to ensure the renewable energy transition, India has been targeting towards 5x increase in the clean power capacity to 450-GW by 2030, out of which, nearly 280-GW will come from solar energy, the ministry stated. The Indian government also considers the domestic solar manufacturing industry as the key to reaching this target, apart from the recent tax plan that will make a broader push to help revive the pandemic-battered economy and create job opportunities in the region.

In the current scenario, India levies a safeguard tax of 14.5% on the imports of solar cells and modules from many countries including China, which will be expired in July 2021. Therefore, companies that are bidding the project auctions must consider the new tax plans of the government.

Source credit:

https://www.bloombergquint.com/business/india-to-tax-solar-equipment-imports-to-boost-domestic-industry