Shift in Policy: CBIC Rescinds Duty Benefits for Solar Sector

The Central Board of Indirect Taxes and Customs (CBIC) has revoked customs duty deferment for solar power firms storing imported goods in bonded warehouses. Affected companies must de-bond solar plants and pay pending duties. This shift might impact profitability due to tariff changes not covered by current agreements.

The Central Board of Indirect Taxes and Customs (CBIC) has officially withdrawn customs duty deferment privileges previously granted to solar power companies storing imported goods in custom-bonded warehouses. This move marks a significant shift in policy that may have substantial financial implications for the industry.

The new regulation, effective from December 17, 2024, no longer permits manufacturing processes or other operations for solar power generation projects to occur within warehouses. This development is part of a broader government effort to tighten control over duty benefits provided to solar power firms.

Experts from firms like KPMG and EY India indicate that this policy change might necessitate the de-bonding of solar farms and mandate the payment of import duties on previously imported modules. This situation could lead to significant cash flow challenges and demand a reevaluation of power purchase agreements, potentially affecting the profitability of solar power projects.

(With inputs from agencies.)