Govt. Clarifies Fiscal Benefits For Solar Installations In SEZs, Empowers Developers

Gov. Clarifies Fiscal Benefits For Solar Installations In SEZs, Empowers Developers

The Export Promotion Council for Export-Oriented Units (EoUs) and Special Economic Zones (SEZs), functioning under the Commerce Ministry, has provided clarifications to developers seeking to procure or import solar panels with fiscal benefits.

The Ministry notified SEZ developers that they can establish non-conventional power plants as part of the infrastructure, eligible for fiscal benefits during initial setup. However, the notification highlighted that operational and maintenance (O&M) activities do not qualify for fiscal benefits. It added that both SEZ developers and units can install solar power plants with fiscal benefits. In response to requests from developers to procure or import solar panels with fiscal benefits, the Ministry clarified that these can be set up within processing areas as units under the SEZ Act, subject to Net Foreign Exchange (NFE) obligations.

The notification also highlighted that municipal or development authorities have made it mandatory to install solar power plants before operations commence. This notification provided clarity to developers, enabling them to set up units within processing areas with fiscal benefits.

Previously, there had been confusion regarding the eligibility of IT/ITES SEZ developers to procure solar panels with fiscal benefits for powering common areas within SEZs. Similar demands came from SEZ units for their consumption. This issue was addressed in the SEZ power guidelines, with specific provisions of the SEZ Act allowing developers to operate units with fiscal benefits and NFE obligations.

On this issue, the Commerce Department clarified on March 7, 2024, and later confirmed that SEZ units can receive the duty benefits under the SEZ Act for the installation and O&M of renewable energy equipment intended exclusively for captive consumption.

Thus, the latest notification directed SEZ developers to establish non-conventional power plants as part of infrastructure with fiscal benefits for initial setup, but without fiscal benefits for O&M. As a result, both SEZ developers and units are empowered to establish solar power plants under these clarified guidelines.