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Centre proposes double-layered taxation on solar equipment imports
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SME Times News Bureau | 01 Aug, 2020
The government proposes a double layered taxation structure on imports
of solar cells and modules in a bid to check proliferation of Chinese
equipment in the critical power sector.
Two sources in the
government said that in addition to the 15 per cent safeguard duty on
solar equipment, a 10 per cent basic customs duty may be levied on solar
modules while a 5 per cent duty may be considered for solar cells.
This
is lower than the Power Ministry's earlier proposal to levy 20-25 per
cent duty on solar equipment imports, but with continuation of the
safeguard duty for one more year, the proposal on basic customs duty has
been lowered.
The Power Ministry has revised its proposal on
basic customs duty on solar equipment as the Director General of Trade
Remedies (DGTR) has extended the levy of safeguard duty at 14.9 per cent
on solar cells and modules imported from the China, Thailand and
Vietnam for another year till July 29, 2021. This duty will come down
to 14.5 per cent from January 30, 2021.
The Power Ministry has
earlier proposed basic customs duty of 20-25 per cent on solar module
imports for the current year that will go up to 40 per cent level in the
next year. Also, the duty on solar cells was proposed at a lower 15-20
per cent level for the first year and a higher 30-40 per cent level in
the next year.
"The basic customs duty proposal has been revised
as it was framed keeping in mind that safeguard duty would stand
withdrawn from August and a higher customs duty would maintain check on
solar equipment imports. But as the safeguard duty is continuing,
customs duty will be the difference between our earlier proposal on duty
and the quantum of safeguard duty," said a source in the Power
Ministry, asking not to be named.
While the Finance Ministry has
notified levy of safeguard duty for an additional period of one year,
it is yet to notify levy of customs duty on solar equipment. Sources
said it would be done soon and may be made applicable retrospectively
from August 1.
The level of customs duty would go up to the
levels proposed by the Power Ministry earlier after the safeguard duty
is withdrawn in July next year.
Though the two-tier duty will be
for all solar equipment imports coming from different countries, it
would largely impact China that till recently was supplying 80 per cent
of India's requirements.
By virtue of FTA with ASEAN, India may
not impose customs duty on countries such as Thailand, Vietnam, Malaysia
and Indonesia. But this may not upset the plan to restrict imports as
these countries together meet just about 10-15 per cent solar equipment
requirements in the country.
In 2018-19, the total imports in
conventional power sector were to the tune of Rs 75,000 crore, out of
which imports from China stood at over Rs 21,000 crore. In the renewable
segment, imports stood at $2.9 billion in FY19 with close to 70 per
cent from China.
Power Minister R.K. Singh had said earlier that
even in renewables, sufficient domestic capacities for both solar
modules and cells existed in the country which should discourage
imports.
The minister had said that in solar cells, the existing
domestic capacity is being increased by more than three times from the
present 2,500 MW. About 4,000 MW of fresh cell manufacturing capacity is
coming up while 3000 MW additional capacity will be added under
manufacturing linked bids for solar projects.
The Power Minister
said that in case of solar modules as well, 7,000 MW of capacity is
being added. These, he said, should be sufficient to meet the country's
need as well as exports.
Apart from higher tariff, the Power
Ministry also proposes to check imports through an approved list of
models and manufacturers (ALMM). It will only allow imports from
entities approved by the Power Ministry.
The Power Ministry has
also suggested to fix stringent quality standards for imports of all
kinds of power equipment and sub-standard products would be outrightly
rejected with the supplier being blacklisted.
Goods so imported
shall be tested in Indian laboratories for adhering to Indian standards
and checks would also to see the presence of malware that has the
potential to jeopardise the security of critical infrastructure
installations of the country.
There is also plan to put another
layer of check at the ministry level that will first clear all import
proposals. So, equipment/items required to be imported from prior
reference countries will be done only after obtaining prior approval of
Power Ministry and the Ministry of MNRE.
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