The National Board of Revenue has lifted value added tax (VAT) on import of solar panels in the face of demand from stakeholders.
The move comes two months after the revenue authority slapped a 5 percent advance income tax (AIT), 5 percent advance trade VAT and 15 percent VAT on the import of solar modules.
Under the latest initiative, the NBR lifted the 15 percent VAT to facilitate fast expansion of the green energy.
“We have exempted the VAT on import to cut cost of solar home systems and encourage its expansion,” said a senior NBR official.
The revenue collector has been offering duty benefit for solar panel import to encourage expansion of solar-based electricity generation.
Until fiscal 2015-16, no tax was applied on solar panels.
The 5 percent AIT was imposed in fiscal 2016-17, said Infrastructure Development Company Ltd, a major financier of renewable energy, in a letter to the NBR at the end of June seeking withdrawal of all taxes on solar module import.
Industry operators feared that new and ongoing green energy initiatives would face spiralling costs if solar panels are to be imported upon payment of high tax.
A number of solar-based initiatives such as solar irrigation, mini-grids, rooftop-based solar home systems and solar power plants are being established in various parts of the country.
Already, 999 solar irrigation schemes, 15 mini-grid and solar rooftops with a combined power generation capacity of 25MW have been established, according to a Sustainable and Renewable Energy Development Authority letter to the NBR.
About 52 lakh solar home systems have already been installed, benefitting 12 percent of the total population in off-grid areas.
The government aims to generate 2,000MW of electricity, or 10 percent of the total production, through renewable energy by 2020.