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The union government has shut the project import route used by solar project developers to circumvent the basic customs duty on solar modules and cells and pay lower duties.

In a notification dated 19 October, the union ministry of finance announced an amendment to the Project Imports Regulations, 1986 to exclude solar power projects from the purview of the norms.

“The regulations may be called the Project Imports (Amendment) Regulations, 2022. They shall come into force on the 20th day of October, 2022," it said.

The development comes after Mint had exclusively reported on 26 September that the the government is looking at ways of plugging the loophole in regulations that allow many solar power developers to avoid paying duties of up to 40% on cells and modules and instead get away with shelling out lower a duty.

The project imports scheme is meant to facilitate import of machinery, instruments and apparatus among others required for setting up a new unit or for substantial expansion of an existing unit. These can be imported at a concessional duty of 7.5%.

The projects covered under the scheme include power, industrial plants, irrigation, mining and projects for exploration for oil or other minerals.

India imposed basic customs duty (BCD) of 40% on solar modules and 25% on cells with effect from 1 April in a bid to cut imports from China and boost domestic manufacturing. But several solar developers were tapping something called “project import scheme,“ to avoid paying high duties on cells and modules.

Several solar power developers seeking ways to avoid paying the duties came up against the the union government that appears to be determined to plug any such circumvention.

A case in point is the Central Board of Indirect Taxes and Customs (CBIC) revoking the concessions it had granted under the bonded warehouse scheme—which allowed solar developers to defer payment of import duties on solar cells and modules. This came after Mint reported on 4 June that some developers were declaring entire solar plants as a “customs bonded warehouse“ to avoid making the payment.

Union ministry of power and new and renewable energy had alerted finance ministry to gather data on which companies have imported solar modules and cells through the project import scheme route after the imposition of the customs duty.

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