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Solar projects cannot avail 7.5% concessional import duty as govt aims to curb imports

New Delhi: Developers of solar power projects won’t be able to take advantage of the 7.5% concessional import duty or avoid the existing basic customs duty (BCD) imposed on imports as a result of a policy change that is likely to increase the cost of manufacturing.

Project Imports (Amendment) Regulations, 2022 were released by the Central Board of Indirect Taxes and Customs on Thursday.

“In the Project Imports Regulations, 1986, against Sr. No. 2, in column 2, and in Sr. No. 3, in column 2, for the words ‘All Power Plants and Transmission Projects’, the words ‘All Power Plants and Transmission Projects, other than solar power plants or solar power projects,’ shall be substituted,” it said.

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The rules concern a 7.5% concessional import rate for newly constructed industrial units. It had happened 5% earlier. This was being used by developers to get around the import BCD for solar products.

In order to boost domestic production, the government implemented BCDs of 25% on imported solar cells and 40% on imported modules starting in April 2022. The majority of the imported solar cells and modules used in India — nearly 85% — come from China. The expense of purchasing expensive cells and modules was recently passed on to solar power projects in India that were awarded before the BCD system.

Industry insiders said that many developers got around BCD by using the project import regulations while posing as builders of new units.

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“In the past many solar power producers have been taking the benefit of a concessional rate of customs duty under the Project Import scheme. With the exclusion of solar power projects from the Project Import scheme the cost of modules would likely increase by approximately 33-34 per cent, said Saurabh Agarwal, tax partner at EY.

Agarwal claimed the action is being taken to advance the government’s “Make in India” agenda under Tranche 2 of the solar PLI programme.

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