ISLAMABAD: A Chinese company M/s ReneSola Pakistan has approached the government to eliminate duty and taxes on components and manufacturing equipments used in local manufacturing of solar PV panels aimed at providing incentives at par with importers.
In a letter to Secretary SIFC, Jamil Qureshi, CEO of the Company has apprised that ReneSola Pakistan, a collaboration between the ACT Group and ReneSola; a Tier 1 Chinese manufacturer of solar panels are in the advanced stages of establishing a solar panel assembly facility at Port Qasim in Karachi.
During May 2024 Bo Li, the Chairman of ReneSola, had visited SIFC offices as well as the Ministry of Industries, PPIB/AEDB and Power Division to discuss this project. During those meetings, the Company was assured that a Solar Policy would be implemented to facilitate the establishment of various solar related manufacturing facilities in Pakistan.
Based on those assurance, the Company worked on a fast pace to establish a solar assembly plant that would produce 750MW of panels in Phase 1, additional 750 MW in Phase 2 and 2GWs of solar cells in Phase 3 with a minimum export quantum of 50%
of the total capacity.
Although, the Company expected the solar policy to be part of the budget for FY2025, the policy has not yet been announced. However, despite that, the Company is going ahead with the project in the hope that a rationalized custom duty and sales tax structure that would allow it to operate and flourish would be established soon.
Highlighting an anomaly in the sales tax and custom duty structure for the manufacture of solar panels in Pakistan, CEO of the Company has stated that currently, imported panels bear 0% customs duty and 0% sales tax, whereas most of the components of a solar panel incur 18% sales tax except for solar cells which can be imported at 0%.
Given that an imported panel has 0% sales tax, the Company is expecting a level playing field to local manufacturers versus importers of panels suggesting that sales tax on all components should also be 0%. Since the sale of solar panels incurs 0% sales tax the sales tax paid by local manufacturers cannot be adjusted and becomes a cost of local production rendering locally manufactured panels uncompetitive in the local market.
Additionally, the equipment imported for the manufacturing of solar panels and solar cells incur an 18% sales tax and 0% customs duty. In this case again as the there is no sales tax on the sale of panels this value is not adjustable and thus ends up as the cost of manufacturing of the panel once again rendering local manufacturers as uncompetitive in the local market.
The Company has recommended the following as part of a long-term solar panel manufacturing policy for Pakistan:
(i) for Panels and Components, the Sales Tax and Duty structure should follow the schedule as below. This will encourage investment in the sector both for exports and import substitution and can not only save Pakistan $300-500 million in foreign exchange by year 5 but also earn foreign exchange to the tune of $300 Million a year. The sector would not only be incentivized to assemble solar panels but with a clear duty structure schedule on components would also encourage localization of components with a clear timeframe for establishment of the component manufacturing facilities.
(ii) all sales taxes as well as duties on the import of machinery for assembly of solar panels as well manufacturing of components should be removed to encourage investment especially since the sale of the finished goods would not attract sales tax. This would allow the assemblers and manufacturers to not only be competitive versus imports but also be competitive in the export market.
