Much to the
relief of solar developers, the Central Board of Indirect Taxes and Customs
(CBITC), has clarified that the bulk of imported solar panels and modules will not attract customs duty, putting to rest
a controversy that had been raging for more than six months.
per cent of panels used in Indian solar projects are imported.
In September 2016, the CBITC had passed an order saying 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
per cent import duty, apart from various kinds of cess, amounting to a total of
around 10 per cent. Its implementation, however, began only in the middle of
2017. Until then solar equipment had always been grouped with “diodes,
transistors and similar semiconductor devices, photosensitive semiconductor
devices,” etc, (HS Code 8541) whose import was free.
In an official order, the CBITC has now clarified that “solar panels or modules
equipped with bypass diodes are classifiable in heading 8541” while “solar
panels or modules equipped with blocking diodes” as well as those with
“blocking diodes and bypass diodes” are “classifiable in heading 8501.” Solar
developers ET spoke to all maintained that most of the solar equipment India
imports are those with bypass diodes only, and will thus not attract duty.
The reclassification became a serious issue for solar developers with solar
imports being held back, initially at Chennai port, and later at all ports
across the country, unless the duty was paid. By October last year, over 1,000
containers of solar equipment had piled up at Chennai port alone, with
developers contesting the duty charged.
Initially, both developers and the ministry of new and renewable energy (MNRE) believed it was a misunderstanding, but after
Customs officials refused to budge, both MNRE minister R. K. Singh and MNRE
secretary Anand Kumar took up the matter with their finance ministry
counterparts. They pointed out that this would raise solar developers’ costs
and thereby solar tariffs, which until then had been falling steadily for the
last several years. They noted that raising costs would impede achieving the
prime minister’s ambitious target of 100,000 MW of installed solar capacity by
A number of developers even began paying the levy sought and clearing their
At a high-level meeting in December last year, Finance Secretary Hasmukh Adhia
had argued strongly on behalf of continuing with the import duty, noting that
solar imports were already subject to investigations by Directorate of Anti
Dumping and Allied Duties. The MNRE sought and received an assurance that solar
equipment for projects already bid for or partially built would be exempted,
since imposing duty would render the projects unviable at the tariffs that had
already been determined. However, the finance ministry clearly seems to have
had a rethink since then.