New Delhi, Dec 17 (PTI) The CBIC has rescinded customs duty deferment benefits available to solar power generation companies supplying electricity storing imported goods in customs bonded warehouses.

In a notification, the Central Board of Indirect Taxes and Customs (CBIC) said the manufacturing process and other operations in relation to "goods imported for solar power generation projects which supply electricity" shall not be permitted in a warehouse.

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"The notification shall come into force with effect from December 17, 2024," the CBIC said.

The CBIC had launched the manufacturing and other operations in a Customs Bonded Warehouse (MOOWR) scheme to defer customs duties on imported goods that are used for the intended purposes of manufacture or carrying out other activities.

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KPMG in India Partner and Head, Indirect Tax, Abhishek Jain, said the government has reinforced its stance against providing customs duty deferral benefits to solar power generating companies by issuing a formal notification.

"Previously, its authority to restrict such benefits through a circular had been contested, but the government has now established a legal provision to prohibit duty deferral benefits under MOOWR for solar power producers," Jain added.

EY India tax partner Saurabh Agarwal said the recent government notification effectively intends to rescind the MOOWR scheme for solar power generation, retroactively impacting companies that have already availed of its benefits.

"This move may necessitate the de-bonding of solar farms and the payment of import duties on previously imported modules, potentially leading to significant cash flow disruptions for affected companies.

"Further, where the power purchase agreements (PPAs) do not account for tariff increases due to changes in law, this may also impact the profitability of the said power plants who have availed the benefits under this scheme," he said.

"Hence, it becomes important for the industry to analyse the amendment in detail along with change in law clause in PPAs to take further actions with respect to filing of claim for increase in tariff, etc," Agarwal said.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)