A petition has been filed before the Central Electricity Regulatory Commission (CERC) concerning the impact of changes in the Goods and Services Tax (GST) rates on a solar power project. GRT Jewellers (India) Private Limited (GJIPL), the petitioner, entered into agreements for the generation and supply of electricity from a 150 MW Solar Power Project in Tamil Nadu. The project was commissioned on 17th June 2022.
The crux of the petition lies in the increase of GST rates from 5% to 12%, affecting the project’s financial aspects. GJIPL contends that this change in law event necessitates compensation to offset the increased financial burden. The petition highlights two key GST notifications: Notification No. 8/2021- Central Tax (Rate) dated 30.09.2021 and Notification No. 24/2018- Central Tax (Rate) dated 31.12.2018.
According to GJIPL, the increase in GST rates directly impacts the project’s costs, particularly in procurement and service contracts. This increase, GJIPL argues, qualifies as a change in law event under the Power Purchase Agreement (PPA) signed with Solar Energy Corporation of India Limited (SECI).
The CERC, after hearing arguments from both GJIPL and SECI, acknowledged the impact of the GST rate change on the project’s costs. It deemed the 2021 GST Notification as a change in law event under the PPA. The Commission directed SECI and the concerned distribution companies to compensate GJIPL for the increased costs incurred due to the GST rate change.
Regarding the method of compensation, the Commission approved a discount rate of 9.12% and an annuity period of 15 years. This decision aligns with previous rulings and ensures that GJIPL is reimbursed for the additional expenditure caused by the GST rate hike.
Furthermore, the Commission addressed the issue of carrying costs, directing SECI and the distribution companies to reimburse GJIPL for the interest incurred on funds utilized to cover the increased GST payments. The Commission emphasized that the compensation should restore GJIPL to its pre-change in law financial position.
The decision also specified that late payment surcharges would apply if compensation payments were delayed beyond the stipulated timeframe. However, the enforcement of compensation for the post-Commercial Operation Date period is subject to further orders from the Supreme Court. In conclusion, the CERC’s ruling ensures that GJIPL receives fair compensation for the financial impact of the GST rate change on its solar power project. The decision underscores the importance of honoring contractual agreements and mitigating the adverse effects of regulatory changes on renewable energy projects.
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