In September 2016, Central Board of Indirect Taxes and Customs (CBITC) had classified solar panels as “electrical motors and generators” under the Customs Act (HS Code 8501). Items in this category attract 7.5% customs duty. However now it has reclassified imported solar modules in order to provide exemption from customs duty.
Now, solar modules and panels with bypass diodes are classified under the code 8541 while modules and panels with blocking diodes or those with blocking and bypass diodes will be classified under the code 8501. Articles under code 8541 will not attract any import duties while articles under code 8501 will continue to attract import duty.
This move will have a profound impact on the Indian solar market, as 90% of solar panels used in India are imported mostly from China, Malaysia, and Taiwan.
Uncertainty related to implementation of duties has already led to a spike in tariff bids and fall in number of bids by project developers. Recent bids have increased by around 18% from the all-time lows.