India’s renewable energy ministry has held talks with the finance ministry to approve its request to cut the import tax on solar panels from 40% to 20%. According to three government sources, India is considering cutting its import tax on solar panels by half. It is seeking a rollback in goods and services taxes on the devices to compensate for a shortfall in local output amid rising demand for renewable energy.
Also, the two ministries may recommend to India’s Good and Services Tax Council to lower the goods and services tax (GST) on solar panels to 5% from the 12% imposed in 2021. The change will boost Indian solar power giants such as Tata Power, Adani Green, and Vikram Solar, which won solar power supply contracts by quoting aggressive tariffs but faced a shortage of local equipment with completing the contracts.
One of the sources said India imposed a 40% solar panel import tax in April 2022 and a 25% tax on solar cells to discourage Chinese imports, in line with Prime Minister Narendra Modi’s plan to become more self-reliant and cut emissions by scaling up renewable energy generation. However, domestic capacity is falling short imports are required to fill the gap.”
The proposal comes as Modi looks at achieving a target of 365 gigawatts (GW) of installed solar capacity by 2031-32, part of a green energy push that extends from promoting electric cars to sustainable aviation fuel. Though solar currently makes up over half of India’s renewable energy capacity, domestic component supplies have been slow to pick up, and higher import taxes also spooked the industry.