‘Removal of 17pc GST will reduce price of solar systems by 30pc’

LAHORE: Removal of 17 percent General Sales Tax (GST) would reduce the price of solar systems by 30%, said energy sector experts. It may be noted that some unconfirmed reports suggest that the government has withdrawn GST on solar system after Prime Minister Shehbaz Sharif had objected to it by terming it ‘exorbitant’ during his address to businessmen in Karachi last week. He had directed Finance Minister Miftah Ismail to make an announcement of removing it forthwith.

Business Recorder had also learnt through reliable sources that the government had agreed to increase it to 26% in its ongoing negotiations with the International Monetary Fund (IMF). However, timely intervention by Sharif has led to removal of GST on solar system.

The energy sector experts were of the view that either 17% GST should be withdrawn altogether or reduced to 5%. It is worth noting that Pakistan Tehreek-e-Insaf (PTI) government had imposed 17% GST on sales of Solar PV Panels & associated components three months ago.

Meanwhile, investment cost for a residential package had already increased due to dollar appreciation against Pakistani rupee, experts added. They have also pointed that the issue was brought to the notice of former energy minister Hammad Azhar repeatedly but to no avail.

Engr Amjad Mumtaz, a leading energy sector expert, said a few solar companies are providing bank financing option and banks are charging 6% rates. However, these companies have much higher rates as compared to the open market.

Ammad Ghafoor, another expert on energy, said the government should also remove the interest rate as there is a direct benefit on exports, agriculture and manufacturing sectors as excessive use of solar system would put less load on grids, thus keeping grids supporting major industries and domestic sector. This is very common in other Middle Eastern countries to discourage such loans to generate jobs and bring more growth to society, he added.

It is worth noting that almost 80% of solar installations are of Chinese origin right now. According to the experts, solar system takes 5 years to pay back; therefore, it is not feasible to import such a huge installation against billions of dollars. A better plan, they said, is to firstly set up manufacturing units in Pakistan to make solar panels and encourage the invertors.

However, some others believe that people would not accept Pakistan-made products in a situation when there is a tendency of rejecting Chinese product in general. But still, a good number of energy sector experts believe that technology transfer for manufacturing of solar panels in the country would ultimately benefit the people and quality products would ultimately make inroads among domestic consumers.

Copyright Business Recorder, 2022