Newsletter V3 (9/4/25)

The Sun Sets on Duty-Free Solar Imports: Analyzing the Policy Shift

India's commitment to achieving its renewable energy targets has recently encountered new challenges. The Central Board of Indirect Taxes and Customs (CBIC) has introduced a restriction on duty-free solar imports, alongside the exclusion of solar projects from the MOOWR scheme (Manufacture and Other Operations in Warehouse Regulations, 2019). These policy changes aim to promote domestic manufacturing while potentially altering the dynamics of India’s solar energy sector.

Exclusion from MOOWR Benefits

The Finance Act (No. 2), 2024, through Section 101, empowers the central government to designate specific manufacturing activities and operations associated with particular classes of goods that will be restricted from being carried out in a warehouse under the MOOWR framework as per Section 65(1) of the Customs Act.

The recent CBIC notification (86/2024-Customs) states that goods imported for solar power generation are no longer eligible for warehousing under the MOOWR scheme if they contribute to electricity production. This exclusion effectively bars solar developers from leveraging the duty deferment benefits offered under MOOWR.

However, it is important to clarify that there is no restriction on the import of capital goods or inputs used for the manufacture of solar cells, solar modules, or other solar products, where the end product is not electricity. These operations can still avail benefits under the MOOWR scheme.

Previously, a Delhi High Court ruling had allowed solar companies to access MOOWR benefits, even for non-integrated goods contributing to manufacturing. The government’s amendment to the Finance Act (No. 2), 2024 Customs Act empowering the government to specify operations that would not be allowed under the scheme nullifies this judgment, restricting solar-related operations in warehouses.

The amendment to the Finance Act (No. 2), 2024, under the Customs Act, grants the government authority to specify operations prohibited under the scheme, effectively overturning this judgment and limiting solar-related activities in warehouse.

Conclusion

The recent policy changes underline India's commitment to self-reliance and domestic industry growth. However, these measures must be carefully balanced to avoid derailing the country’s renewable energy ambitions. A collaborative approach involving stakeholders, manufacturers, and policymakers is essential to overcome immediate challenges while paving the way for a sustainable solar ecosystem.

India’s solar story is at a crossroads. Whether these policy shifts accelerate self-reliance or create roadblocks depends on the government’s ability to address industry concerns and drive transformative change.