Sales tax may ‘increase solar panel rates’ in Pakistan by 30%

KARACHI: The imposition of sales tax on the import of solar panels in Pakistan would increase their price by about 30 per cent, Arab News quoted dealers and importers as saying on Wednesday.

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

Pakistan levied sales tax on nearly 150 items, including solar panels, through a Finance (Supplementary) Bill, 2021 that was approved by the National Assembly earlier this month to meet one of the conditions of the International Monetary Fund (IMF) for the revival of a stalled $6 billion loan programme.

“After the implementation of this tax, the price of solar panels will increase from Rs55/watt to Rs70/watt. This is almost a 30 per cent surge,” Pakistan Solar Association (PSA) vice chairman Naveed Karar said while addressing a joint news conference with the Karachi Electronic Dealers Association (Keda).

“If the government will not take this decision back, its impact will be devastating for solarisation and industry,” he added.

Pakistan is pursuing Prime Minister Imran Khan’s policy to reduce carbon emissions and decrease its reliance on imported fossil fuel, as it hopes to add 30 per cent clean energy to its power mix by the end of this decade.

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

“The imposition of sales tax on the import of solar panels will definitely discourage the government’s efforts to increase the share of renewable energy to the total power mix,” Karar said, adding that the decision had been taken despite assurances from the finance minister that the product would not be taxed.

Keda senior vice-president Saleem Memon said that sales tax would increase the rate by about Rs12,000 per panel of 540 watts.

“This will be beyond the purchasing power of people who live in the country’s remote areas and frequently rely on this technology,” he added.

Memon said that the sales tax would be over and above the freight costs and other charges which were already too high.

“Freight charges have been increased from $800 per container to $6,000. The allied products of solar panels, including inverters and batteries, have also been taxed,” he added.

PSA executive committee member Muhammad Zakir Ali informed that 80 per cent 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 were planning to increase the quantum further.

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

The installation of a solar system is a one-time investment which provides continuous power supply for more than 25 years without additional costs when compared to other power plants that need costly fuels, he added.

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