The government is considering a uniform duty structure for industrial users and commercial importers of solar equipment, including batteries, as discriminatory tax treatment is undermining investment in the renewable-energy sector.
Under the proposed arrangement, importers may enjoy a concessional 1.0 per cent customs duty on solar energy equipment for six months.
A proposal to waive all other taxes, retaining only the 1.0 per cent customs duty, was placed before the Cabinet on Monday, official sources said.
Currently, industrial users can import solar equipment as capital machinery under a concessional duty-tax structure, while commercial importers do not enjoy the same facility.
The proposed single duty-tax regime would cover commercial importers; distributors; engineering, procurement and construction (EPC) contractors; renewable energy service companies (RESCOs); and industrial users.
It is likely to remain effective for six months from the date of issuance of the relevant gazette notification, officials said.
At present, commercial importers face a combined duty and tax burden ranging from 17 per cent to 62 per cent, including 15 per cent VAT and 2.0 per cent advance trade VAT.
A recent meeting between commercial importers of solar equipment and representatives of the Finance Division, Power Division, and the National Board of Revenue (NBR) decided to introduce uniform tax treatment for a limited period to accelerate the expansion of solar power.
Bangladesh Sustainable and Renewable Energy Association (BSREA) President Mostafa Al Mahmud, who attended the meeting, said the disparity in tax treatment among commercial importers, EPC companies, RESCOs, and industrial users was hindering the country's solar transition.
"We have sought the waiver of 15 per cent VAT for two years to encourage rapid solar transition," he said.
The high cost of liquefied natural gas (LNG) was increasing the government's subsidy burden for power generation, he added.
Waiving taxes on solar equipment would not cause any significant revenue loss, while it could help reduce the subsidy burden associated with power purchases, Al Mahmud said.
Senior NBR officials said the decision was aimed at reducing taxes on solar equipment and batteries used for electricity generation.
"We hope that the cost of solar energy production will come down after the tax waiver is offered," a senior NBR official said.
Earlier, in a letter sent to the Power Division secretary on August 31, the BSREA said the existing duty structure was undermining the development of the renewable energy supply chain despite the government's policy of promoting clean energy.
According to the association, commercial importers face significantly higher duties than EPC contractors and RESCOs.
For instance, the combined duty and tax burden on lithium batteries, battery energy storage systems (BESS), and mounting structures is as high as 58.40 per cent for commercial importers, compared with around 17 per cent for EPCs and RESCOs.
Commercial importers also pay around 28 per cent on solar inverters, 31.50 per cent on battery management systems (BMS), 37.25 per cent on SCADA/monitoring systems, and 61.80 per cent on DC cables, according to the BSREA.
The disparity is even wider compared with industrial users, who can import renewable energy equipment for their own use by paying only 1.0 per cent duty in some cases, the association said.
Such differential treatment is making commercial imports economically unviable and disrupting the supply chain for renewable energy equipment, it added.
The BSREA also raised concerns over the customs valuation of solar photovoltaic (PV) modules.
Although the nominal duty and tax incidence on solar PV modules is around 13.50 per cent, the customs authorities are currently applying a valuation of $3 per kilogram, resulting in an effective tax incidence of around 28-29 per cent based on the actual invoice value, it said.
The association proposed withdrawing the weight-based valuation and determining customs value on the basis of actual commercial invoices and prevailing international market prices.
It said a uniform duty structure would help lower the cost of renewable energy projects, ensure a level playing field among market participants, and support the government's renewable energy targets for 2030 and 2041.
The proposed measure comes as the government is placing greater emphasis on renewable energy to reduce dependence on imported fossil fuels and strengthen energy security.
