In a major relief to solar power project developers in India, the government has exempted imported solar panels from customs duty.
The Central Board of Indirect Taxes and Customs (CBITC) has reclassified imported solar modules in order to provide exemption from customs duty. In September 2016, CBITC had classified solar panels as “electrical motors and generators” under the Customs Act (HS Code 8501). Items in this category attract 7.5% customs duty.
Several project developers had challenged the move in court and had left several hundred containers of solar panels at the ports delaying the project for weeks. The move would have had a profound impact on the Indian solar market, as 90% of solar panels used in India are imported mostly from China, Malaysia, and Taiwan.
Now, solar modules and panels with bypass diodes are classified under the code 8541 while modules and panels with blocking diodes or those with blocking and bypass diodes will be classified under the code 8501. Articles under code 8541 will not attract any import duties while articles under code 8501 will continue to attract import duty.
The customs duty was only one of the incremental costs that developers were facing and continue to face. Indian agencies were until recently were conducting anti-dumping investigations into imports from China, Malaysia, and Taiwan. The investigations were wrapped up prematurely after the Indian Solar Manufacturers Association withdrew its petition calling for the probe. ISMA is expected to file a fresh petition soon.
A probe to check if imported panels should be subjected to safeguards duty continues. Initial recommendation by the government agency called for the implementation of a 70% safeguards duty on imports. A project developer managed to win a legal stay on implementation of this interim order.
Uncertainty related to implementation of these duties has already led to a spike in tariff bids and fall in number of bids by project developers. Recent bids have increased by around 18% from the all-time lows.