India’s 2020 budget has proposed to raise basic customs duty (BCD) to 20% on imports of solar cells starting Feb. 2, according to the notification issued by the Indian government recently.
Classified under tariff item 8541.40.11, solar cells, whether or not assembled in modules or panels, were subject to nil BCD, as stipulated in No. 23 of the notification No. 24/2005 Customs dated on March 1, 2005.
Based on the new duty structure, the Indian government will split the tariff item 8541.40.11 under the Harmonized System (HS), an international classification system for traded goods, into the following items:
Tariff item 8541.40.11: Solar cells, not assembled.
Tariff item 8541.40.12: Solar cells assembled in modules or made up into panels.
The tariff rate on the above items will be increased from zero to 20%. The change in tariffs will take effect immediately. However, the existing BCD rates on solar cells, whether or not assembled in modules, shall continue.
It’s worth noting that solar cells and modules, which were classified under CTH 8541.40.11, are split into two items, with solar cells that are not assembled being classified under 8541.40.11, while those assembled in modules are classified under 8541.40.12. The tariff rate on both items are 20%. This change will come into force immediately.
At present, solar PV products imported into India are subject to a safeguard duty of 15%. Starting at 25% on July 30, 2018, the duty was reduced to 20% for a six-month period between July 30, 2019 and January 29, 2020. It then stepped down to 15% in the remaining six months from January 30 to July 29 this year.
Therefore, foreign solar cells arrive in India will remain unaffected despite the launch of new BCD and the splitting-up of the HS Code for solar cells. In other words, imported solar cells will continue to be subject to the 15% safeguard duty until it expires on July 29.
Some lawyers in the know argue that the safeguard duty is a temporary relief, which cannot be reintroduced after it expires and must be reduced in effect annually under the WTO rules. By this line of reasoning, the spilt of the HS Code for solar cells, coupled with an increase in the BCD from 12.5% to 20%, is seen a stopgap solution to protect the Indian PV industry after the safeguard duty expires on July 29. Once the duty does expire, the Indian government may cancel the BCD exemption of goods under HS Code 8541, subjecting imported cells to a 20% duty.
According to figures released by Bridge to India, foreign solar panels dominated 90% of the market in India one year after the introduction of safeguard duty, because Indian developers have pivoted to modules imported from countries such as Vietnam, Singapore, and Thailand. With the solar market having been taken over by cheap imported products, Indian manufacturers are seeking to expand into emerging and potential solar markets to generate profits.
Source: PV Men
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