The Standing Committee on Finance and Revenue at the National Assembly has opposed in unison a proposal that was presented to adopt a ten percent of General Sales Tax (GST) and an additional 8 percent duty on imported solar panels and photovoltaic cells in an attempt to enhance the use of renewable energy and ensure it remains affordable to the consumers.
Committee’s Decision
At the committee meeting of Tuesday, during the discussion on the proposal of the Federal Board of Revenue (FBR) to introduce standard GST rates to all solar equipment imported in Pakistan, it was observed that the Federal Board of Revenue (FBR) was willing to transfer this proposal to the Ministry of Energy (MoE). The FBR stated that by exempting imported panels, a level playing field had been removed against the local producers, and may have resulted in money laundering. Despite these issues, the legislators affirmed the right of people to access clean energy and opposed the tax.
Presentations of the FBR
The chairman of the FBR has informed parliamentarians that locally assembled solar panels are already subject to the same GST rate, although imports are exempt from tax. The revenue collector argued that the extension of GST to imports was to safeguard the local industries and reduce the illegal financial flows caused by tax exemptions. Authorities on the topic also pointed out that the adoption of solar panels is on the rise, but their use in rural areas is still minimal, as their initial expenses are relatively high.
Legislators Press Affordability
On the side of the tax opponents, emphasis was placed on the importance of maintaining the affordable nature of renewable technologies, particularly for households and small businesses. They cautioned that a further tax of 18 percent is likely to hike consumer prices and slow down the movement towards solar energy. Some members highlighted the government’s determination to reduce energy consumption and alleviate energy poverty, emphasizing the use of solar power as a significant solution to the issue of load-shedding in Pakistan.
Support for Domestic Industry
Although the committee disapproved the GST proposal, it was decided that locally produced manufacturers had to be supported by other means. These ideas included subsidies for specific projects, simplified access to financing, and investments in domestic solar panel assembly plants. The committee members pledged to collaborate with FBR in developing policies that would be neutral to the various interests of the industry and the people.
Next Steps
The decision by the Standing Committee provides the framework for further discussion between the finance ministry, the FBR, and stakeholders in the solar industry. Legislators have tasked the entire solar sector to develop a bill that will promote clean energy while safeguarding local manufacturers and ensuring that prices do not remain prohibitive to the end user.
