According to reports, India has signed ITA-1 agreement with WTO. For all such items notified in the ITA-1 list, Basic Customs Duty is exempt under Notification 24/2005-Cus for import of the said items. Since solar cells and modules are covered under the ITA-1 list, it may not be possible to levy Basic Customs Duty on import of cells and modules. However, under the existing duty structure, the inputs (like EVA, Tedlar, Toughened Glass) which go into the manufacturing of solar cells and modules attract duty of 12.83%.
This results in an inverted duty structure, which favours the import of the cells / modules and puts the domestic manufacturers to a disadvantage. It is, therefore, proposed that the inverted duty structure should be corrected, which will promote domestic manufacturing and lead to increased value addition as the industry expands in scale and integration.
Presently, the customs duty on import of inverters required for solar PV based systems is very high at 21.52%.The high duty adds to the cost of the solar energy generation. Most of the requirements are presently being met through imports. It is proposed that the import tariff on these products be reduced by 50%, which will help in bringing down the cost of the solar PV based electricity generation.
Presently, there is an anomaly between EOU and SEZ with regard to reversal of import duties on input materials in case of DTA sales of the final product (cells or modules as the case may be), as goods chargeable to NIL rate of duty under EOU scheme as per the notification “EOU No. 23/03 C.E. dated 31st March 03 Sl.No2 read with notification no.22/03 C.E. Sl.No. 6 dated 31st March 03”, whereas, for SEZ, there is no such rule as the goods are cleared under “SEZ Rule 2006 under Chapter-V Sl.No.47”. It is, accordingly, proposed that this anomaly should be rationalized. It is suggested that the Government should levy duty on final product (cell / module) @ 4% as Special Additional Duty (SAD) to remove the anomaly and provide a level playing field to all.
Focus Product scheme is an incentive scheme under Foreign Trade Policy granted to exporters of solar cells and modules. Exporters of cells and modules are granted 2% Focus Product Incentive on FOB value of exports. SEZ and EOU units are not eligible for this benefit. Hence, exporters lose this benefit, if the sales are made to the domestic market. It is, therefore, proposed that in order to encourage the units to make higher sales of their capacity in the domestic market, Government can provide this incentive for DTA sales made by either DTA, EOU or SEZ unit. Incentive can be in the form of duty credit tradable scrips which can be used for import of inputs duty free.
Under the Budget 2010, the Basic Customs Duty has been reduced to 5% on all items of machinery, including instruments, apparatus, appliances, transmission equipment and auxiliary equipment (including those required testing and quality control) and components, required for initial setting up a solar power generation project or facility (notification no. 30/2010-Customs, 27.02.2010). It is submitted that the above duty structure be extended to existing units also which undertake expansion of the capacity.
Under the Jawaharlal Nehru National Solar Mission (JNNSM), capacity addition of 20 GW of solar energy has been envisaged by the year 2022, which would require creation of much higher production capacity of cells and modules than the existing capacity. As the JNNSM also provides for promoting the domestic solar PV manufacturing industry, the extension of the Notification No 30/2010-Customs, 27.02.2010 to cover the existing units undertaking expansion of their production capacity, would lead to strengthening the domestic manufacturing base. It is submitted that the excise duty exemption, being provided on specified goods required for initial setting up of solar power generation project or facility (Notification 15/2010-CE, Dt. 27.02.2010), be also extended to cover the existing units undertaking expansion of their production capacity.