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India considers slashing import taxes on solar panels

2023-06-01

India is considering reducing import taxes on solar panels and seeking a rollback in goods and services taxes (GST) on these devices to address a shortage in local production and meet the increasing demand for renewable energy.

The renewable energy ministry in India has engaged in discussions with the finance ministry to gain approval for the proposed reduction of the import tax on solar panels from 40% to 20%, the sources revealed. They emphasised that the decision is not yet finalised and hence requested anonymity.

Furthermore, the two ministries are contemplating recommending a reduction in the goods and services tax (GST) on solar panels from 12% (imposed in 2021) to 5% to the Goods and Services Tax Council, the sources added.

The 40% import tax on solar panels was implemented by India in April 2022, along with a 25% tax on solar cells, with the intention of discouraging imports from China. This move was aligned with Prime Minister Narendra Modi's ambitious plan to foster self-reliance and reduce emissions by expanding renewable energy generation.

However, one of the sources acknowledged that domestic production capacity falls short of meeting the demand, necessitating the need for imports to bridge the gap.

The proposal emerges as Prime Minister Modi aims to achieve a target of 365 gigawatts (GW) of installed solar capacity by 2031-32. This target is part of a broader push towards green energy, encompassing initiatives such as promoting electric vehicles and sustainable aviation fuel.

As of now, the finance ministry of India has not responded to email inquiries seeking comments. A spokesperson for the renewable energy ministry has assured that a comment will be provided at the earliest opportunity.