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Why Solar Industry Dies with the Implementation of GST?

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The reliance on fossil fuels for energy generation is polluting our environment. Solar Power Plants are the alternative to the increasing costs in Electricity, Gas, and Petrol as well as the rising amounts of Environmental Pollution in the country. There are primarily four types of solar solutions:

  • Residential Solutions
  • Commercial Solution
  • Industrial Solutions
  • Agri-Based Solutions

Pakistan has a great sun irradiation potential. Residential and industrial users in Pakistan have installed these power plants on their own initiative. This has resulted in a decrease in Environmental Pollution, but also provided a substantial contribution to the reduction of Pakistan’s Import Costs for the future years. Installing solar panels Solar System is a one-time investment that provides benefits for over 25 years without additional costs in comparison to the Generators and Fossil fuel-based Power Plants which require costly Diesel and Oil to be imported each month. Pakistan enjoys the benefit of being one of the neighboring countries to China. This ensures Good Supply Chain backing. Meanwhile, our Government’s pledge to World Bank on Renewable Energy Adoption is a strength that enables this industry to grow despite difficulties. It means that till the time the country keeps on seeking loans, it has to fulfill its promise to shift its energy mix more towards renewables. In achieving so the current regime has eradicated the need for NEPRA involvement for Net metered connections under 25kW peak power. Bribery in Govt. institutions was another cause of process difficulty in acquiring a net meter.

On January 13 the 13th of January, it was made known by Honourable Minister of Finance and Revenue, Mr. Shaukat Tarin, during his address on the Finance (Supplementary) Bill, 2021-2022 that the tax on Solar was eliminated from the proposed Budget Proposal.

On the 17th of January, when processing import GDs through the FBR Portal for Customs Clearance it was discovered by various importers that sales Tax exemption was removed as well as Tax was assessed on solar-powered equipment. The new tax could result in a substantial increase in the price of solar panels as well as related equipment, making it out of the budget of the average person. There is product malafide found in different so-called big giant vendor companies that mix and match their fraudulent products with genuine products and mark the fake ones with fake product stickers as well.

There is already a rate monopoly by large importers who determine the rates. Then the customer also has no intent to subscribe for after-sales services. Thus shortening the services industry and associated services tax collection by the provincial regulators. Whereas, worldwide installation companies earn through the subscription model. The difficulty worsens as part of Dollar Pak Rupee exchange rate instability. The recent imposition of GST has affected the industry. There has been Panic buying and artificial scarcity of products. A supply-Demand gap is going to increase during the upcoming Chinese holidays.

Let us also evaluate the market failures in supporting the advancement of solar technology. Implementing taxes would enforce more smuggled products peeking in. Unfortunately, in Pakistan due to Afghan border smuggling, there are fake products found in Kali Bari Peshawar, Hall Road Lahore, College Road Rawalpindi in presence of which the costlier panels are good quality products stand little chance against these second hand (refurbished/dismantled) product spread. Do-it-yourself models advocacy on YouTube has already been resulting in inefficiency and inadequate protection measures.

Altogether, there has been improved consumer awareness. There is international funding to back the industry. Organizations like GIZ and PGREF have come into existence. Even more, our Net metering capacity is unsaturated. There are competitive paradigms. There has been streamlining of licensing services. It’s time to switch to green alternatives to save the planet for coming generations. Thus, it is an appeal to President Arif Alvi, President. Arif Alvi, Prime Minister Mr. Imran Khan, Minister of Finance and Revenue, Minister of Energy Power Division, Speaker National Assembly, Speaker Senate, and all other relevant Ministers to reconsider and review the decision to impose a sales tax for Solar Panels and other related equipment. In the long-term, and in the overall interests of the country and the citizens of Pakistan we are asked to lift this unnecessary burden and provide relief to the entire community to enhance the Renewable Energy Sector in the Pakistani Country.

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