Saur Energy Explains: How CERC Is Ensuring GST Savings Reach Renewable Energy Consumers

The Central Electricity Regulatory Commission (CERC) has issued a crucial order recognising the recent reduction in GST rates on renewable energy devices as a "Change in Law" event, providing clear directions to ensure these savings reach electricity consumers. 

This suo motu order, dated November 4, 2025, addresses how the GST cut from 12 percent to 5 percent will be implemented across India's renewable energy sector.​

Understanding the GST Reduction and Its Impact

In September 2025, India's GST Council approved a landmark tax reform - slashing the GST rate on renewable energy devices and their manufacturing components from 12 percent to 5 percent effective September 22, 2025. 

This change applies to a comprehensive range of technologies, including solar panels, wind turbines, biogas plants, waste-to-energy systems, and ocean wave energy devices.​​

The financial implications, as per Ministry of New and Renewable Energy are substantial. For utility-scale solar projects, which typically cost INR 3.5-4 crore per MW, developers can now save INR 20-25 lakh per MW. At the scale of a 500 MW solar park, this is poised to translate to project cost reductions exceeding INR 100 crore. For residential consumers, a typical 3 kW rooftop solar system becomes cheaper by approximately INR 9,000-10,500, making clean energy adoption more accessible under schemes like PM Surya Ghar: Muft Bijli Yojana.​

The ‘Change in Law’ Concept Explained

The CERC order centres on a critical regulatory concept called "Change in Law." When renewable energy developers and electricity distribution companies (DISCOMs) sign Power Purchase Agreements (PPAs), these contracts include provisions to handle unexpected changes in taxation or regulations that affect project costs.​

In 2021, when GST rates on renewable equipment increased from 5 percent to 12 percent CERC recognised this as a Change in Law event and allowed developers to seek compensation for their increased costs. 

Now, with the rate reduction to 5 percent, the commission is applying the same principle in reverse - ensuring the savings are passed to electricity buyers rather than retained as extra profit by developers.​​

What the CERC Order Directs

The November 2025 order establishes clear rules for how the GST reduction should be applied.

CERC has determined that the reduced 5 percent GST rate applies to all renewable energy projects where the bid was submitted before September 22, 2025, but where either the invoice for goods or services was issued on or after that date, or payment for those goods or services was made and tax paid on or after that date.​

This timing mechanism is crucial. It means that even projects contracted at higher rates can benefit from the tax cut if their actual procurement happens after the new rates took effect. 

However, the commission emphasises that there must be clear documentation showing a direct correlation between specific projects, the goods or services supplied, and the invoices raised by suppliers.​

Anti-Profiteering Provisions Ensure Fair Implementation

The order invokes Section 171 of the GST Act, 2017, which contains anti-profiteering provisions. This legal framework mandates that any reduction in tax rates or benefits from input tax credits must be passed on to consumers through corresponding price reductions.​​

Under these provisions, if renewable energy companies retain the GST savings as additional profit rather than reducing their tariffs, they can face penalties equivalent to 10 percent of the profit amount. This creates a strong incentive for transparency and fair pricing throughout the renewable energy supply chain.​

Practical Application for Ongoing and Future Projects

For renewable energy generating stations and DISCOMs, the order requires both parties to consider the GST reduction's impact before approaching CERC for tariff determinations. Developers must furnish relevant documentation backed by auditor certificates to enable contracting parties to reconcile the reduced expenditure.​

The commission specifies that in cases where procurement, commissioning, or commercial operation dates occur on or after September 22, 2025, but the bid submission preceded this date, both renewable generators and distribution companies are duty-bound to factor in this GST reduction. Monthly tariff or charges must be adjusted or refunded accordingly.​

The Regulatory Framework Going Forward

The CERC order establishes a systematic approach for handling GST-related cost changes in the renewable sector. The order also references the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021, and Section 63 of the Electricity Act, 2003, creating a comprehensive regulatory framework for processing these claims.