Govt looking to plug loophole in solar equipment import duty: Report

The central government is looking at ways to plug a loophole in regulations that are allowing solar power developers to avoid paying duties of nearly 40% on cells and modules

The central government is looking at ways to plug the loopholes in regulations that are allowing solar power developers to avoid paying duties of nearly 40 per cent on cells and modules, and are only shelling out 5 per cent, reported Livemint on Monday. 

In a bid to reduce imports from China and boost domestic manufacturing, the Centre imposed basic customs duty (BCD) of 40 per cent on solar modules and 25 per cent on cells from April 1. However, several solar developers are tapping 'project import scheme' to save high duties on cells and modules, the report added. 

Domestic manufacturers can import machinery, instruments and apparatus at a concessional duty of 5 per cent to set up a new unit, and expand an existing one under the project import scheme. The scheme covers power, industrial plants, irrigation, mining sectors, and projects for exploration for oil or other minerals.

The Ministry of New and Renewable Energy has alerted the finance ministry about the loophole being exploited by the solar power developers. Raj Kumar Singh, the union minister of New and Renewable Energy, said that his ministry has asked the finance ministry to gather data on which firms have so far imported modules and cells under this scheme. 

In an interview, Singh said, “Suppose you are going to set up a solar park, then you bring everything across and just assemble it here — that means solar modules, inverters — then you just have to pay 5 per cent. We will take this entire data, and after that, we will close that door," quoted Livemint. 

Solar power developers, who have imported modules and cells at 5 per cent duty, would not be allowed to charge higher tariffs from the consumers under the pretext of paying higher BCD, the Union Minister said, quoted Livemint.

“You can’t claim double benefit in the sense that you haven’t paid duty, you evaded it, and then you claim either grandfathering or pass-through. You can’t do that," Singh said, quoted the business daily.