50% Reduction in Tariffs! India Plans to Significantly Reduce Import Taxes on Photovoltaic Modules

Three government sources said there was a shortage of local capacity due to the growing demand for renewable energy. To compensate for this shortfall, India is considering halving the import duty on its solar modules and working to reduce the goods and services tax on this equipment.

India’s Ministry of Renewable Energy has held talks with the Ministry of Finance to approve its request to reduce import taxes on solar modules from 40 percent to 20 percent (equivalent to a 50 percent reduction) from 40 percent, which they spoke on condition of anonymity as the decision has not yet been finalized.

Separately, the two ministries may make a proposal to the Goods and Services Tax Board of India to reduce the goods and services tax on solar modules to 5% from 12% in 2021, the sources said.

The change will give a boost to Indian solar giants such as Tata Power, Adani Green, and Vikram Solar, which won solar-powered contracts by quoting aggressive tariffs but faced local equipment shortages and could not complete them.

In order to discourage Chinese module imports, India began imposing a 40% solar module import tax and a 25% solar cell tax in April 2022, which is in line with Prime Minister Modi’s plan to expand renewable energy generation, increase India’s self-reliance, and reduce emissions.

However, one of the sources said, “insufficient domestic capacity… Imports are needed to fill the gap.

Modi hopes to achieve 365GW of installed solar capacity by 2031-2032, as part of a green energy push that includes the promotion of electric vehicles to sustainable aviation fuel.

India’s finance ministry did not immediately respond to an email seeking comment. A spokesman for the renewable energy ministry said it would comment as soon as possible.

India’s current annual solar module capacity is 32GW, but the annual demand for modules has reached 52GW due to the rapidly rising demand for green, cheap energy in corporate offices, industrial units and large factories. In 2026, India’s module capacity will reach 110GW

Solar currently accounts for more than half of India’s renewable energy capacity, but the country’s module supply has been slow to pick up and the industry has been intimidated by higher import taxes.

One of the administration officials stressed the need for tax reform. India’s dependence on solar module imports over the next two years “is expected to reach levels of almost 8-10GW per year,” he said.

India imported $3 billion worth of solar modules in 2021-2022, 92% of which came from China, according to government data. Government sources said the tax cuts had the potential to reduce the cost of imported components by a fifth, bringing them closer to the price of domestically produced components.