Customs duty on solar imports from April 2022
The Ministry of New and Renewable Energy (MNRE) has notified the media that a basic customs duty (BCD) on solar imports up to 40% is set to be levied from 1 April 2022.
A 40% charge will be imposed on solar modules, while cells will attract a 25% charge. According to the ministry, already bid out projects will not see any charges.
Domestic manufacturers have been anticipating the customs duty on solar equipment since Finance Minister Nirmala Sitharaman included it in the union budget proposal in 2020.
MNRE minister RK Singh told reporters in June last year that such a basic customs duty was supposed to be imposed from 1 August 2020, to prevent the dumping of Chinese goods, where 80% of solar equipment is sourced from.
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The government then decided to continue imposing safeguard duty on such imports for a third consecutive year as a stop-gap solution. The basic customs duty was expected to replace the safeguard duty, as the latter can only be imposed for a maximum of four years and has to be progressively lowered owing to World Trade Organisation's (WTO) safeguard measures.
A safeguard duty of 14.9% was levied on Chinese imports for six months from 30 July 2020, to 28 January 2021, while the duty will be slightly lesser at 14.5% for the following six months.
Disagreements over the grandfathering clause between the Ministry of Finance (MoF) and the MNRE over providing exemptions to already signed power purchase agreements delayed the BCD implementation until now.
Adding a ‘grandfather clause’ to existing power purchase agreements means that there is an understanding between the government and solar developers that the project costs more than the allocated budget at the time of closing of the deal, and hence, compensation will be provided to the developers through the distribution companies.
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