China to Phase in Consumption Tax on Solar Cells
China will begin phasing in a consumption tax on photovoltaic solar cells under a policy announced on Friday by the Ministry of Finance, the General Administration of Customs and the State Taxation Administration. This will see PV solar cells subject to a 2% consumption tax from April 1, 2027, with the rate increasing to 4% from April 1, 2028.
At the same time, the authorities will continue to exempt a range of next-generation technologies from the consumption tax between Sept. 1, 2026 and Dec. 31, 2028, including perovskite, tandem and gallium arsenide solar cells, as well as sodium-ion batteries, solid-state batteries and fuel cells, reflecting continued policy support for emerging technologies.
The tax adjustment also applies to solar cells that have already been assembled into modules. Industry participants said this means vertically integrated manufacturers will also be required to pay consumption tax on the cell manufacturing portion of their products even when the cells are produced in-house and sold as finished modules.
Policy Shift Reflects Industry Maturity and Supply-Side Reform
China first introduced a 4% consumption tax on batteries on Feb. 1, 2015. However, seven categories of batteries—including solar cells, lithium primary batteries and lithium-ion batteries—were exempted from the tax.
According to industry sources, the exemption reflected China’s policy priorities at the time, as the solar cell industry was still in its early stages of development and remained an emerging renewable technology that required government support. The tax incentive was intended to lower production costs, accelerate renewable energy adoption and encourage technological innovation and industrial upgrading.
Market participants said China’s has become the world’s leading producer of solar cells over the past decade. However, the rapid expansion has also led to overcapacity, fierce price competition and widespread losses across the industry.
According to the OPIS Global Solar Markets Report, FOB China Tunnel Oxide Passivated Contact or TOPCon M10 solar cell prices were assessed at $0.0404 per watt peak on July 14, down 18.2% from the corresponding assessment at the beginning of the year.
Official production data also highlights the imbalance between supply and demand. According to annual development roadmap released by the China Photovoltaic Industry Association in this February, China produced over 660 gigawatts of solar cells in 2025, while the new domestic PV installations in 2025 totaled 315.07 GW, implying that cell production exceeded actual domestic demand by more than two times.
Industry participants noted that the 2025 production level was achieved despite manufacturers operating at relatively low utilization rates, while China’s nameplate solar cell manufacturing capacity has already exceeded 1,200 GW.
One industry source said the consumption tax adjustment is intended to allow fiscal policy to play a more targeted role in promoting the healthy development of the industry by discouraging further irrational capacity expansion. The source added that the move signals a broader transition away from policy support toward greater reliance on market-based competition.
Another market participant expressed a similar view, saying the continued tax exemption for technologies such as perovskite solar cells demonstrates that China intends to continue supporting next-generation technologies while allowing mature PV technologies to compete under market forces. This approach, the source said, should help accelerate technological progress and industrial upgrading.
The latest measure is not the first tax policy adjustment targeting China’s solar industry. Since April 1 this year, China has eliminated the 9% export tax rebate on PV wafers, solar cells and modules, following an earlier reduction from 13% to 9% in December 2024.
Industry participants said these successive tax adjustments reflect China’s efforts to guide the solar industry away from policy dependence and toward market-driven development, arguing that the gradual withdrawal of broad-based policy support is a natural consequence of the industry’s maturity. Sources also said the measures appear consistent with the government’s broader objective of curbing excessive price competition, reducing structural oversupply and accelerating the exit of smaller, less competitive manufacturers.
Near-Term Price Support, Long-Term Impact Likely Limited
Market participants expect the new consumption tax to increase manufacturing costs and potentially provide short-term support for solar cell prices.
A top-10 solar cell manufacturer said the policy could lead to a meaningful, albeit temporary, increase in cell prices as buyers are encouraged to front-load purchases ahead of the tax’s implementation.
However, the producer said the tax is unlikely to provide lasting price support given the scale of oversupply across both the solar cell segment and the broader PV supply chain.
Another market participant agreed, saying the long-term impact of the policy may be limited because manufacturers are likely to face difficulties passing the additional costs on to customers amid persistent oversupply and weak profit margins.
“Buyers remain highly price-sensitive, particularly after prolonged losses across the supply chain. The cost pass-through could prove even more challenging in China’s domestic market than in export markets,” the source said.
Meanwhile, a downstream project developer noted that export-oriented production could increasingly shift overseas to avoid the new tax burden. According to the source, some manufacturers are evaluating plans to export wafers to Southeast Asia and restart previously idled cell and module production lines that were originally established to supply the US market before trade restrictions reduced their utilization.
“Ultimately, manufacturers will need to compare the potential tax burden on orders after April 2027 with the cost differential between domestic and overseas production before determining whether such a strategy is economically viable,” the source said.
—Reporting by Summer Zhang, szhang@opisnet.com and Brian Ng, bng@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com