Solar equipment imports, largely from countries such as China, may soon come under double taxation with the Director General of Trade Remedies (DGTR) looking to consider continued imposition of 15 per cent safeguard duty (SGD) on imports of solar cells and modules beyond the cutoff date of July 29.
The DGTR is scheduled to do oral hearing on extension of SGD on July 3 through video conferencing. If a decision to extend safeguard duty is taken then solar equipment imports from August onwards faces the prospect of double taxation. The power ministry has already said that upto 20-25 per cent basic customs duty is going to be imposed on solar modules and 15-20 per cent on cells.
DGTR’s oral hearing was previously scheduled be held on June 11, 2020, but was postponed due to certain administrative exigencies. Now, the hearing in first week of July will clear the way whether safeguard duty gets extended.
The safeguard duty was imposed starting from July 30, 2018 for a period of two years to protect the domestic industry against dumping of cheap equipment, especially from countries like China that commands over 80 per cent of India’s market for solar gear. The duty was set at 25 per cent for the first year, followed by a phased down approach for the second year, with the rate reduced by 5 per cent every six months until it ends in July, 2020.
With safeguard duty scheduled to end, power ministry proposed a 20-25 per cent basic customs duty on solar module imports for the current year that will go upto 40 per cent level in the next year.
Also, the duty on solar cells has been proposed at a lower 15 per cent level for the first year and a higher 30-40 per cent level in the next year.
If both safeguard and customs duty on solar gear imports go concurrently then the sector will face heavy duty load of close to 50 per cent including cesses and surcharge.
“This would kill the solar industry in India that is still largely based on imports as there are issues about domestic capacity and concerns on quality,” said a solar power producer asking not to be named.
He added that such a situation may not arise as such high levels of taxation and import restrictions may not be permitted under international trade agreements.
But government sources said that duty levels could go up as both basic customs duty and safeguard duty are WTO compatible. He however added that if safeguard duty was extended then customs duty plan may be postponed for now.
According to Mercom, the DGTR held a review investigation in March 2020 to see if there was a need to extend the safeguard duty beyond its deadline following an application filed by the Indian Solar Manufacturers Association (ISMA). They sought for the duty to be extended by another four years. The domestic manufacturers filing the petition had provided import data released by the Department of Commerce from 2014-15 to 2019-20 (up to September 2019) for this investigation.
The domestic solar module manufacturers have also stated that the policy (SGD) had failed to achieve the desired objectives of protecting domestic manufacturers from a sudden surge of imports since the safeguard duty was imposed for only two years, and the implementation period of utility-scale solar projects is 18 to 24 months.
Mercom said that in May, the DGTR extended the deadline for filing responses to a questionnaire investigating the continued imposition of the duty because of the nationwide lockdown.