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NEW DELHI : The Central Board of Indirect Taxes and Customs (CBIC) has revoked the concessions it had granted under the bonded warehouse scheme—which had allowed solar developers to defer payment of the steep import duties on solar cells and modules that took effect on 1 April—in the wake of blatant abuse of the scheme.

Mint had reported on 4 June that certain developers were declaring entire solar plants as a “customs bonded warehouse" to avoid the payment of basic customs duty (BCD) of 25% on solar cells and 40% on modules.

According to the CBIC, “Manufacture and other operations in a bonded warehouse is a duty deferment scheme. Thus, both BCD and IGST on imports stand deferred. In the case of goods other than capital goods, the import duties (both BCD and IGST) stand deferred till they are cleared from the warehouse for home consumption, and no interest is payable on duty. In case the finished goods are exported, the duty on the imported inputs (both BCD and IGST) stands remitted i.e., they will not be payable. The duty deferment is without any time limitation."

The CBIC, in a communication it sent on Saturday to all principal chief commissioners, chief commissioners, principal director generals, director generals, principal commissioners and commissioners who are working under it, said that the grant of permission is not in accordance with the Manufacture and Other Operations under the Warehouse Regulations 2019.

“The permissions granted to the type of generating units referred herein above need to be immediately reviewed and the necessary follow up action taken. No further permissions in such cases should be granted in terms of section 65 of the Customs Act, 1962," the order added.

Under the scheme both BCD and IGST on imports stand deferred; and for goods other than capital goods, the import duties (both BCD and IGST) are deferred till they are cleared for domestic consumption. The duty doesn’t attract any interest.

“It is brought to notice of the board that certain solar power generating units applied for permission under section 65 of the Customs Act, 1962 for warehousing of imported solar panels/solar modules and related accessories, etc. declared as capital goods to generate electricity as resulting/resultant goods for home consumption. Certain jurisdictional Commissioners have granted such permissions," CBIC said.

Some solar power developers had taken recourse to the scheme even as the Union government planned to ramp up domestic solar equipment manufacturing capacity to enable the sector to play a bigger role in global supply chains. "Incidentally, it may also be noted that the resulting electricity is also not ordinarily capable of being deposited in a warehouse," CBIC said in its communication.

Spokespeople at the ministries of new and renewable energy, finance, and CBIC did not respond to queries mailed on Saturday till press time.

Meanwhile, experts have welcomed the CBIC's clarification. “The prompt government clarification is helpful as domestic manufacturing needs clear and consistent policy support. Now that the government has identified Make in India as a priority, it needs to go all out to ensure that there are no loopholes or mixed messages on this front," said Vinay Rustagi, managing director at consulting firm Bridge to India. 

 

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