Sales tax could ‘raise solar panel tariffs’ in Pakistan by 30%

KARACHI: Imposing a sales tax on the import of solar panels in Pakistan would increase their price by about 30%, Arab News quoted dealers and importers on Wednesday.

It would also make it difficult to add clean energy to the country’s energy mix in years to come, they added.

Pakistan levied sales tax on nearly 150 items, including solar panels, through a Finance (Supplementary) Bill 2021 which was approved by the National Assembly earlier this month to address the one of the conditions of the International Monetary Fund (IMF) for the revival of a blocked a program of loans of 6 billion dollars.

“After the introduction of this tax, the price of solar panels will drop from Rs55/watt to Rs70/watt. This is an increase of almost 30%,” said Naveed Karar, Vice President of the Pakistan Solar Association (PSA), at a joint press conference with the Karachi Electronic Dealers Association (Keda).

“If the government does not reverse this decision, its impact will be devastating for solarization and the industry,” he added.

Pakistan is continuing Prime Minister Imran Khan’s policy of cutting carbon emissions and reducing reliance on imported fossil fuels as it hopes to add 30% clean energy to its energy mix by the end of this decade.

Dealers said the recent move to tax solar panels would undermine that vision.

“Imposing a sales tax on the import of solar panels will certainly discourage government efforts to increase the share of renewable energy in the total energy mix,” Karar said, adding that the decision was made despite the assurances from the Minister of Finance that the proceeds would not be taxed.

Keda senior vice president Saleem Memon said the sales tax would increase the rate by about Rs 12,000 per 540 watt panel.

“It will exceed the purchasing power of people who live in remote parts of the country and who frequently depend on this technology,” he added.

Memon said the sales tax would come on top of freight and other charges that were already too high.

“Freight costs have gone from $800 per container to $6,000. Solar panel related products, including inverters and batteries, were also taxed,” he added.

PSA executive committee member Muhammad Zakir Ali said 80% of the solar panels were used by people who did not have direct access to electricity in Pakistan.

He informed that people had imported about 2,380 megawatts of solar panels in 2021 and planned to further increase the quantum.

“The decision will discourage the use of solar energy systems in the country since there is no local production of these panels. The government should have given the stakeholders confidence before making this decision,” Ali said.

Installing a solar system is a one-time investment that provides continuous power supply for more than 25 years at no additional cost compared to other power stations that require expensive fuels, he added.

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