CERC Awards Compensation To Indigrid Solar Over Change In GST Rates

CERC Awards Compensation To Indigrid Solar Over Change In GST Rates

In its latest judgment, the Central Electricity Regulatory Commission (CERC) granted compensation to Indigrid Solar-I (AP) Pvt Ltd. over escalated GST rates. The firm approached the Central Commission seeking compensation, citing increased project costs due to introducing GST on solar products.

The solar power generator, in its petition, told the CERC that after the firm submitted its bid for a SECI project, the Finance Ministry introduced GST on solar products. Indigrid Solar appealed to the CERC to consider this a ‘Change Of Law’ event and compensate the firm accordingly. It was on account of the additional expenditure incurred by the cleantech company due to the revised taxation regime. 

Earlier, Indigrid Solar-I (AP) Pvt Ltd and Indigrid Solar-II (AP) Pvt Ltd bid for a 500 MW SECI tender. SECI issued the Request for Selection (RfS) for these projects on January 2, 2016, under its parent company, Solar Holdings XI BV. These projects were situated at Ananthapuramu Solar Park in Andhra Pradesh. 

As per the case details, The firm submitted its bid on April 5, 2016, whereas the Centre’s GST notification was issued on June 28, 2017. “After the implementation of CGST and IGST from 01.07.2017, various exemptions cease to exist. Solar Power Generation equipment was placed under the 5% to 18% tax bracket as per the GST rate schedule for goods on 18.05.2017. This change of tax up to 18% from zero rates has escalated the capital cost as well as operational cost (O&M Charges, Water Charges and Land Lease Charges) of the Petitioners, making the quoted tariff at the time of bid unviable for the project,” the petitioner in the case told CERC.

Meanwhile, after hearing the arguments of the solar firm, SECI, and the local discoms in Andhra Pradesh, the Central Commission ordered in favor of the firm. It considered the plea of the solar company to treat the introduction of GST after bid submission as a ‘change of law.’ The CERC, thus, ordered compensation to the company.

“In the instant petitions, the bids were submitted by the Petitioners on 05.04.2016. PPAs were executed between the Petitioners and SECI on 05.10.2016, and the SCoD of the projects were 16.10.2017. The projects were commissioned on 22.06.2018 (Petition No. 310/MP/2022) and on 08.10.2018 (Petition No. 362/MP/2022). We observe that a fresh GST was levied qua Notifications No. 12/2017, 13/2017, and AP GST Notification No. 16/2017 (GST Laws) levied from 01.07.2017, which is after the submission of a bid. Therefore, the Petitioners are entitled to compensation for a Change in Law in terms of Article 12 of the PPA due to the impugned GST Laws,” the CERC order said.

The central agency also directed the contracting parties to carry out the reconciliation to demonstrate the impact account of the imposition of the GST by exhibiting clean and one-to-one correlation with the projects and the invoices raised supported with an auditor certificate.