India might halve import tax on solar panels, rollback GST

India might halve the import tax on solar panels and rollback the GST rate on the devices because of a shortage in domestic production, Reuters reports in an exclusive, citing three government sources it didn't identify, since the decision isn't finalized.

The country's renewable energy ministry has had discussions with the finance ministry to reduce the import tax on solar panels from 40 percent at present to 20 percent. The two ministries could also recommend to India's Good and Services Tax Council that tax rate on solar panels be lowered to 5 percent from the current 12 percent.

India imposed a 40 percent tax on import of solar panels and a 25 percent tax on import of solar cells in April 2022 to ringfence its nascent domestic solar industry, but domestic production is falling short of demand. The country currently has capacity to manufacture 32 GW of solar panels per annum, but demand is closer to 52 GW.

India is targeting 365 GW of solar capacity by 2031-32, as part of a shift to clean energy that weans the country off expensive oil imports.

Solar is also India's third largest source of energy, after coal and oil, with installed capacity just above 64 GW as of February 2023. The country is home to some of the largest solar parks in the world, including Bhadla, Rajasthan.