Importers and domestic producers of solar panels will enjoy exemption from the value added tax (VAT) as per a recent order of the National Board of Revenue (NBR).
The exemption from 15 per cent VAT would help promote the use of renewable energy at an affordable cost, officials said.
The VAT wing of NBR issued a statutory regulatory order on August 8 in this regard.
The exemption came two and a half months after the VAT was imposed on the equipment of solar system.
In the budget for current fiscal year (FY) 2018-19, the NBR imposed a 15 per cent VAT and increased the advance trade VAT (ATV) to 5.0 per cent on the import and production of solar modules or panels.
However, the existing 5.0 per cent advance income tax and ATV will remain unchanged.
Officials said the NBR waived the VAT following requests from both the public and private sectors.
Last year, the import and production of photovoltaic cells, the basic elements of the solar system, enjoyed exemption from both VAT and ATV.
The stakeholders had urged the NBR to reintroduce the tax benefit. They argued that the cost of solar energy would go up due to imposition of VAT on its equipment.
The power division under the power, energy and mineral resources ministry, Sustainable and Renewable Energy Development Authority of the division, Bangladesh Solar and Renewable Energy Association and the state-owned Infrastructure Development Company Ltd. had made several requests to the NBR for the withdrawal of VAT.
The government has set a target of producing 2,000 megawatt of power from renewable energy sources by 2020, accounting for 10 per cent of the total demand for power.
To increase the electricity generation, the government is implementing a set of projects, including solar irrigation, solar mini-grid, solar rooftop project and large solar park.
Meanwhile, some 999 solar irrigation pumps, 15 mini-grid and rooftop solar system with 25 megawatt capacity have been installed in different places across the country.
Solar power is considered the most potential source of renewable energy.
Around 12 per cent of the total population is getting electricity from 5.2 million solar home systems across the country.
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