Relief for solar panel importers with provisional stay on safeguard duty

Move will provide interim relief to importers; whether duty would eventually be payable would depend on the finalisation of the proceedings before the High Court

The ministry of finance has allowed a ‘provisional stay’ on imposing safeguard duty on imported solar cells and modules in India. The department of revenue in its notice issued dated August 13 said that due to an order by Odisha High Court imposing stay on safeguard duty on solar panels, the department has decided to “not to insist on payment of safeguard duty.”

This would come as a temporary relief for the solar power producers importing solar panels. The department of revenue in its notice said, “Accodingly, till further direction from the Board, solar cells and modules, be assessed provisionally on furnishing of simple letter of undertaking by the concerned person.”

Abhishek Jain, Tax Partner, EY India explained that while this would provide interim relief from payment of safeguard duty to the solar cell importers; whether or not it would eventually be payable would depend on the finalisation of the proceedings before the High Court.

“Further, given that it is only an interim relief, whether the solar players should factor the safeguard duty as a cost or not would still be an important decision point,” Jain said.

The Indian government announced imposition of safeguards duty for two years -– 25 per cent for the coming year, 20 per cent for six months thereafter and 15 per cent after that. The duty would specifically impact the solar panels coming from China, as more than 85 per cent of India’s solar capacity is built on Chinese panels.

Shapoorji Pallonji had petitioned in the Odisha High Court against the imposition of the duty. The Court last week, decided to put a stay on the duty.

The solar industry had calculated that this duty imposition would lead to escalation of 50-60 paisa in the final solar tariff. This, the project developers said would lead to tariff revision for several recently bid and under construction projects. The safeguard duty is a pass-through cost i.e. the project developer can pass it on their final power sale price.

Power project developers are expecting close to 7,000 Mw of projects to land in soup owing to change in tariff, regulatory process and likely cancellation of PPAs by states who would find increased tariff as costly. India aims to add 100 Gw of solar power capacity by 2020 which entails adding close to 25 Gw for three years. India’s current solar power capacity stands at 20 Gw of the total renewable capacity of 70 Gw.