In what should be a major relief for the solar power sector, the Delhi High Court on Monday (May 6) quashed show cause notices issued by the Central Board of Indirect Taxes and Customs (CBIC) to solar power firms. The CBIC had ruled that these firms were not eligible for the Manufacturing and Other Operations in Warehouse Regulations (MOOWR) scheme.
However, the Delhi High Court terminated the order issued by CBIC, saying that these firms came under the ambit of MOOWR.
Simply put, now solar power developers importing panels and modules can now avail the benefit of the MOOWR scheme, under which they will be allowed to defer the payment of 44% customs duty and 12% GST till the equipment is put to use for generation of electricity.
The MOOWR scheme was introduced by CBIC in 1996 and revamped in 2019 to boost the ‘Make in India’ campaign. The Customs Department, under the scheme, had allowed the deferral of customs duty on imports of goods used as an input in manufacturing, for sale of the final product within the country as well as for exports.
Cashing in on the scheme, the solar industry had started importing inputs and capital goods to generate power for sale within the country. Since electricity is exempt from GST, the Customs Department had issued a circular saying such solar power companies were not eligible for the MOOWR scheme and had issued show cause notices (SCNs) for non-payment of duties.
A writ petition was filed by ACME Heeragarh Powertech Pvt Ltd challenging the CBIC notices.
Experts claimed that the move will help the industry ease working capital issues. Saurabh Agarwal, Tax Partner, EY said, “A big win for renewable energy in India. The Delhi High Court’s decision on ACME Heeragarh Powetech Private Limited allows solar power plants to benefit from the government’s MOOWR scheme. This means lower costs for these companies and a fairer playing field for all.”
“The court’s ruling protects the rights of electricity producers and could lead to a more sustainable future. But the industry needs to watch out for (further) developments as the government might change the rules in the future to exclude solar farms from the scheme,” he cautioned.
Echoing him, Anita Rastogi, Principal at Price Waterhouse & Co LLP, said, “The order from Delhi High Court puts to rest the controversy on solar power firms’ eligibility for the MOOWR scheme. It is now to be seen if the government plans to file an appeal in SC or makes amendments in the law.”
Published in: www.cnbctv18.com