India Announces 40% BCD On Solar Modules, 25% On Solar Cells From April 2022

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In a major development today, MNRE announced that it’s proposal to impose BCD on solar cells and modules (without grandfathering of bid-out projects) has been agreed to by the Ministry of Finance.

The below will be the structure of the duties:

– BCD on Solar Modules wef 01.04.2022 = 40%
– BCD on Solar Cells wef 01.04.2022 = 25%

The Ministry of Finance has also advised that the customs notification in this regard shall be issued at an appropriate time.

The announcement also mentioned “In view of above, the undersigned is directed to inform all RE implementing agencies and other stakeholders, to take note of above trajectory and to include provisions in their bid documents, so that bidders take the trajectory into account while quoting tariffs, in all bids where the last date of bid submission is subsequent to this GM. In all such bids, the imposition of BCD as per above trajectory shall not be considered as change- in-law.

During the recent FY21 Union Budget, the government did not move ahead with its long due proposal to impose basic custom duties (BCD) on solar equipment but such a move was expected under its phased solar manufacturing initiatives.

“In no way can we come to the conclusion that BCD will not take place,” Ministry of New and Renewable Energy Secretary Indu Shekhar Chaturvedi had said during a post-Budget media briefing.

“When you see the Budget carefully, it is written that a phased manufacturing plan will be notified by the government. So, the phased manufacturing plan is a kind of policy which includes everything, including basic custom duty,” MNRE Joint Secretary Amitesh Kumar Sinha had said at the briefing.

There has been an ongoing uncertainty regarding imposition of BCD for over two years now.

An expert said “Even though there is time for the BCD to come into effect, such heavy duties may significantly slow down the growth of solar energy uptake in India. The government should balance the needs of pushing domestic manufacturing vis-a-vis the availability of cheaper solar energy for the country.”

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