APERC Recognizes GST And Customs Duty Cuts As a Change In Law, Orders Renewable Energy Tariff Benefits For Consumers

The Andhra Pradesh Electricity Regulatory Commission (APERC) has issued a suo motu order recognizing recent reductions in taxes on solar and renewable energy equipment as “Change in Law” events under existing Power Purchase Agreements (PPAs). The order was passed under the leadership of APERC Member and Chairman-in-Charge Sri P.V.R. Reddy and applies to agreements between renewable energy generators and Andhra Pradesh’s distribution companies, including APSPDCL, APCPDCL, and APEPDCL.

The Commission has acknowledged two major tax reductions that impact renewable energy projects. The first relates to the reduction in the effective Basic Customs Duty (BCD) on imported solar modules from 44 percent to 40 percent, which came into effect on February 2, 2025. The second concerns the reduction of the Goods and Services Tax (GST) on renewable energy devices and components from 12 percent to 5 percent, effective September 22, 2025.

APERC stated that these tax reductions result in lower project costs and, therefore, should be treated as Change in Law events under the provisions of the PPAs. The Commission noted that the objective of the Change in Law provisions is to restore the economic position of the affected parties. As a result, any financial benefit arising from statutory tax reductions must be passed on to the electricity procurers and ultimately to consumers.

The order follows notifications issued by the Ministry of Finance and discussions involving the Ministry of Power, the Central Electricity Regulatory Commission (CERC), and the Solar Energy Corporation of India Limited (SECI). These organizations recommended the adoption of a uniform regulatory approach across states to ensure that the benefits of tax reductions are transferred to consumers and to minimize disputes and litigation within the renewable energy sector.

According to the framework established by APERC, the customs duty benefit will apply to projects where the bid submission date was before February 2, 2025, and the relevant invoices or tax payments were made on or after that date. Similarly, the GST benefit will apply to projects whose bid submission date was before September 22, 2025, and where invoicing or tax payments occurred on or after the effective date of the tax reduction.

To facilitate implementation, renewable energy generators have been directed to submit audited project-wise financial data and supporting invoice records within 60 days from the date of the order. The distribution companies must verify and reconcile these claims within 30 days of receiving them. Any resulting tariff revisions or financial settlements must then be completed within the next 30 days.

APERC further clarified that any disputes related to the calculation or implementation of these benefits may be brought before the Commission under the provisions of the Electricity Act, 2003. Through this order, the Commission aims to ensure transparency, protect consumer interests, and provide regulatory certainty for renewable energy projects in Andhra Pradesh.