05 Sep 2018Posted By: Mudit Handa

Why has Safeguard Duty been Suspended on Solar Panel Imports?

Expansion of business at global interface definitely gives a prominent status in the domestic market. It assists the small traders and MSMEs to have a direct access to the global opportunities.

There is no doubt that a unique Import Export Code can fetch you lucrative business opportunities in the name of your business on the global platform.

The trade & commerce authorities have so far assisted the nationwide export-import entities in easing away innumerable snags in the entire process of IEC registration.

Recently, the DGFT had begun automation of the IEC registration process in order to do away with the technical glitches such as browser errors that hitherto many export-import entities were facing.

In the recent days, there was an intense tussle in respect of imposing of safeguard duty on the import of solar cells. The finance ministry has altogether changed the status quo by suspending the safeguard duty on import of solar panels for the time being.


Before we go into the depth of this issue, we must understand the meaning & significance of the Safeguard duty.


#1. What is the Safeguard duty?

Safeguard duty is an indirect levy charged by the central government on specific goods, on which are intended for indigenous manufacturing and export promotion. In order to protect the interests of Indian traders and exporters, the government levies the Safeguard duty. Apart from that, provisional safeguard duty can also be imposed if are goods are custom cleared within Domestic Tariff Zone, i.e. a region in India that is outside the SEZs, EPZs and EOUs.


#2. How much was Safeguard duty recommended on the import of solar panels?

The decision regarding the Safeguard duty on solar cells import was a matter of verbal turmoil between the government and the domestic traders. Recently on July 16, Directorate General of Trade Remedies (DGTR), had recommended to impose safeguard duty on the solar panels and built modules imported from China and Malaysia for 2 years @ 25% for the 1st year and 20% for the first 6 months of the 2nd year and 15% for the next 6 months.


#3. Why was Safeguard duty being imposed on the import of solar panels?

It was done so on the grounds that excessive imports of solar equipment from China and Malaysia was causing the domestic manufacturers ‘serious injury’. In a bid to do rule out the contention from the domestic manufacturers, the authorities had recommended imposing safeguard duty on the solar equipment.


#4. How did the Chinese and Malaysian solar equipment import affect Indian market?

Everyone knows that the current government is keen on realising its “Make in India” initiative that, among other things, supports indigenous power generation.

  • Added to it, the generation of green power is a key concern for the government.
  • As per a probe conducted by Indian Solar Manufacturers Association (ISMA), domestically manufactured solar cells and panels had accounted for only 10% of Indian solar projects in 2014-15.
  • This had dropped down even low in the subsequent years. Mostly the developers had preferred Chinese and Malaysian solar equipment, which was indeed much cheaper than that locally manufactured modules.  


Considering the above-mentioned plight, the DGTR recommended imposing Safeguard duty on such imports.

The entire investigation report on solar equipment import can be read in detail on DGTR website.


#5. Why has the government decided to suspend Safeguard duty as of now?

The Solar power developers and the Ministry of New & Renewable Energy have complained The safeguard duty might severely retard India's ambitious solar power programme that aims to attain 100 GW of solar capacity by 2022. This is so because costly domestic inputs would raise the tariffs, and the extra charge will be ultimately passed on to power discoms and residents.


#6. How can the issue be resolved?

The finance ministry has added that the safeguard duty on solar equipment from China and Malaysia can be assessed provisionally on furnishing a LUT bond along with Import Export Code while Customs Clearance.

  • This means that an entity could get the consignment released without paying the duty, but only after executing LUT bond of the equal amount.
  • This will ensure that the safeguard duty can be imposed on cleared consignment as well, in case the safeguard duty is upheld later on.


On the whole, the importers obviously require an Import Export Code to carry out smooth & hassle-free global trade.


In case you need any guidance on online IEC Registration, feel free to contact us at 8881-069-069.


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