India’s plan to levy a customs duty on solar panels will be framed in a way that it does not severely hit domestic companies who operate from special economic zones, or SEZs.
Such zones are typically considered as foreign territories for import duty purposes. The government, hence, plans to charge a small ‘equalization levy’ on imports of solar panels from factories based in such SEZs and run by Indian companies to sell to domestic customers, said the person requesting anonymity.
This would be in lieu of the basic customs duty that is set to be levied on imports of solar components from other nations, mainly China and Malaysia.
Such a move will allow units based in SEZs to be competitive, compared to imports while selling to local customers, and at the same time, make a level-playing field for companies outside these zones who do not receive similar tax and other benefits.
India had set up these SEZs to boost exports and earn valuable foreign exchange. The plan to impose the tax on solar panel imports has, however, led companies based in these zones to approach the government to exclude them from it when they sell to domestic buyers.
SEZ units say the tax incentives that initially helped them set up shop have dried up. Over the years, the tax benefits given to SEZs have diminished with these units having to pay minimum alternate tax (MAT) from 2012.
Reference- livemint, Economic Times, Our Source