New and ongoing green energy initiatives are set to face spiralling costs in the wake of the shock imposition of value-added tax on the import of solar panels from this fiscal year.
The National Board of Revenue has slapped a 5 percent advance income tax (AIT), 5 percent advance trade VAT and 15 percent VAT on the import of the module. In other words, there would be about 27 percent levy.
The measure by the revenue authority took the industry stakeholders, particularly the solar panel importers and solar system integrators, by surprise as they have been demanding zero duty import benefit to facilitate fast expansion of the green energy.
“Solar home systems will become unaffordable for many because of the latest NBR measure,” said Dipal Barua, president of the Bangladesh Solar and Renewable Energy Association (BSREA), a body for solar panel importers, integrators and producers.
The tax administrator slapped the advance trade VAT and VAT at a time when the government aims to generate 2,000MW of electricity, or 10 percent of total production, through renewable energy by 2020.
A number of solar-based initiatives such as solar irrigation, mini-grids, rooftop-based solar home system and solar power plants are being established in various parts of the country.
Already, 999 solar irrigation schemes, 15 mini-grid and 25MW solar rooftops have been established, according to Sustainable and Renewable Energy Development Authority (SREDA). The SREDA, in a letter to higher ups, said the solar home systems have the most potential for renewable energy generation.
About 52 lakh solar home systems have already been installed, benefitting 12 percent of the total population in off-grid areas.
The agency urged the NBR to waive all sorts of VAT and tax on solar panels and cells.
“The expansion of renewable energy will be seriously affected unless the tax and VAT are withdrawn,” said Infrastructure Development Company Ltd (Idcol), a major financier for renewable energy, in a letter to NBR higher up at the end of last month.
The cost of every solar based project will go up substantially, as a result of which it will be tough to make the schemes financially viable, even after paying financial grant.
As a result it will be difficult to attain the government's renewable energy target. Besides, large panels are used to generate power through solar energy-based mini-grid, irrigation pump and rooftop systems.
But these plants do not have the capacity to make such type of panels or do not have proper certification, Idcol said.
Better quality solar panels could be imported at prices lower than those of locally assembled panels if import duty and taxes are exempted, it added.
Contacted, Idcol Executive Director and CEO Mahmood Malik said the rise in import cost for the imposition of advance trade VAT and VAT will be beneficial for local assemblers. “But overall, the impact will be negative.”
Idcol is promoting the expansion of solar rooftop systems to generate more energy.
“Solar rooftops will not become attractive. But, there will be huge impact in the long-term if we can generate 400-500MW of electricity from solar rooftops,” he added.
BSREA Treasurer Md Ataur Rahman Sarker said mis-declaration in imports will increase because of the VAT.
Bangladesh requires 50MW equivalent solar panels annually and most of the demand is met through imports because of insufficient domestic production, he said.
NBR Chairman Md Mosharraf Hossain could not be reached for comments despite repeated attempts.