Regulatory updates

Solar power generation projects excluded from MOOWR

Effective 17 December 2024

Goods imported for solar power generation projects that supply electricity can no longer be warehoused under Section 65.

Notification No. 86/2024-Customs, issued on 16 December 2024, provides that goods imported for solar power generation projects supplying electricity cannot be kept in a warehouse for manufacturing and other operations under Section 65 of the Customs Act 1962. It took effect on 17 December 2024. The exclusion concerns power generation. Solar manufacturing, such as cells and modules, is a separate activity and is not covered by it. Developers who already held a licence for generation projects should review their position and their route out.

The government can now exclude classes of goods and operations

The Finance (No.2) Act 2024 gave the government power to notify classes of goods or operations that are not permitted in a MOOWR unit.

The Finance (No.2) Act 2024 added a proviso to Section 65 of the Customs Act 1962, allowing the Central Government to notify classes of goods or operations that may not be carried out in a warehouse under that section. The exclusion of solar power generation projects in December 2024 was made under this power. It means the scope of the scheme can now change by notification, so it is worth checking the current position before committing a project to MOOWR.

Section 65A: on the statute book, not yet in force

Section 65A would change how IGST and compensation cess are treated in a warehouse. Its effective date has not been notified.

The Finance Act 2023 inserted Section 65A into the Customs Act 1962. If brought into force, it would make IGST and compensation cess payable when goods are deposited in a warehouse, rather than deferred. Its effective date has not been notified, so in practice IGST continues to be deferred under MOOWR. The position could change by notification, and it is worth watching for any unit where IGST deferral matters to cash flow.