Budget 2020: Customs duty ambiguity on imported solar power equipment

Solar modules constitute 80% of the cost of a solar power project.

Solar power producers are in a knot over the proposed basic Customs duty (BCD) on imported solar cells and modules in the Union Budget on Saturday. The Budget speech mentioned two new item heads to be inducted in the Customs duty bracket.

The Budget has proposed 20 per cent BCD on solar equipment. “Create tariff items 8541 40 11 for ‘Solar Cells, not assembled’ and tariff item 8541 40 12 for ‘Solar Cells assembled in modules or made up into panels’”.

The tariff rate for these items is 20 per cent. However, these items will continue at ‘Nil’ BCD,” said the Budget.

However, solar cells and modules (under item no. 8541) are exempted from any BCD, according to a 2005 notification of the Department of Revenue. This effectively translates into no BCD on the imported solar cells and modules.

There is existing safeguard duty of 15 per cent levied on imported solar cells and modules, especially those coming from China. Sector executives said if the BCD is imposed, the cost of imported solar equipment will go up in the range of 35-40 per cent. This would lead to solar tariff likely going up by to Rs 3 per unit, said an executive.

Solar modules constitute 80 per cent of the cost of a solar power project.