The Ministry of Commerce has allowed developers of Special Economic Zones (SEZ) and units in SEZs to install solar systems for captive consumption, following demands from the Export Promotion Council for Export Oriented Units and SEZs (EPCES).

In a clarification, the ministry said that duty benefits under Section 26 of the SEZ Act are allowed for SEZs to install, operate, and maintain renewable energy equipment like solar panels exclusively for captive use on the condition that the power generated is not wheeled out to the domestic tariff areas (DTA). The solar equipment will be treated as capital goods.

The ministry has also directed Development Commissioners of SEZs to consider requests from SEZ developers/co-developers to set up non-conventional power plants as part of infrastructure with fiscal benefits. However, no fiscal benefits will be available for the solar systems’ operation and maintenance (O&M).

According to EPCES, various IT/ITES developers had requested that they be allowed to import solar panels without duties and procure them from DTAs without payment of GST to install them in their buildings to provide power supply to common areas of SEZs.

Units in SEZs had raised a similar demand but there was no clarity in this regard in the SEZ power guidelines. According to existing provisions, SEZ and IT/ITES developers can set up units in SEZ processing areas with fiscal benefits but under the Net Foreign Exchange (NFE) obligation.

EPCES had contended that it was difficult for SEZ units to operate with the NFE obligation. However, municipal and development authorities had made it mandatory for the units to install solar power systems before commencing their operations.

The matter was resolved after EPCES brought the difficulties faced by its members to the attention of the Commerce and Power ministries and the Directorate General of Export Promotion, Central Board of Indirect Taxes and Customs.

In May, the Ministry of New and Renewable Energy had exempted renewable energy projects located inside SEZs and EOUs and supplying power exclusively to green hydrogen (or its derivatives) projects, also located in an SEZ or set up as an EOU, from the purview of Approved List of Models & Manufacturers for solar modules.

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