India may cut solar panel import tax to make up domestic shortfall

According to three government sources, India may cut import taxes on solar panels in half and seek a reduction in goods and services taxes on the devices to make up for a shortfall in domestic output amid rising demand for renewable energy.

According to three sources who declined to be identified because the decision has not yet been finalized, India’s renewable energy ministry has held talks with the finance ministry to approve its request to reduce the import tax on solar panels from 40% to 20%.

According to the sources, the two ministries may also make a recommendation to India’s Good and Services Tax Council to reduce the goods and services tax (GST) on solar panels from 12% to 5% in 2021.

To discourage Chinese imports, India imposed a 40% solar panel import tax in April 2022, as part of Prime Minister Narendra Modi’s ambitious plan to become more self-sufficient and reduce emissions by increasing renewable energy generation.

“However, domestic capacity is falling short imports are required to fill in the gap,” said one of the sources.

The proposal comes as Modi considers achieving a target of 365 gigatonnes (GW) of installed solar capacity by 2031-32, as part of a green energy push that includes everything from electric car promotion to sustainable aviation fuel.

The Indian finance ministry did not immediately respond to requests for comment. A spokesperson for the Ministry of Renewable Energy said a statement would be issued as soon as possible.