RERC Declares 12% To 5% GST Cut On Renewable Energy Equipment As Change In Law, Orders Consumer Benefit Pass-Through

The Rajasthan Electricity Regulatory Commission (RERC) has issued a significant suo motu order declaring the recent reduction in the Goods and Services Tax (GST) on renewable energy equipment as an official “Change in Law” event. The order, issued on June 3, 2026, was passed by Chairman Dr. Rajesh Sharma along with members Hemant Kumar Jain and Vijay Pal Singh. The Commission said the financial benefit arising from the GST reduction must be passed on to electricity consumers across Rajasthan.

The decision follows a notification issued by the Central Government on September 17, 2025, which reduced the GST rate on renewable energy devices and their manufacturing components from 12% to 5%. The revised tax rate came into effect on September 22, 2025. The reduction reversed the GST increase introduced in 2021 and applies to a wide range of renewable energy technologies, including solar power systems, wind turbines, biogas plants, waste-to-energy equipment, photovoltaic cells, and other related components.

RERC said that since the GST reduction applies uniformly to all renewable energy projects, it decided to issue a common order instead of requiring individual petitions from project developers. According to the Commission, a project-wise approach would have resulted in unnecessary litigation, delayed consumer benefits, and increased administrative work. The order also aligns with directions issued by the Ministry of Power and follows a similar regulatory approach adopted by the Central Electricity Regulatory Commission (CERC).

The Commission further noted that the order is consistent with the anti-profiteering provisions of the Central GST Act, which require any reduction in tax rates to be passed on to the final recipients through lower prices. In this case, the benefit must ultimately reach electricity consumers through lower power procurement costs.

The order applies only to renewable energy projects where the bidding process was completed before September 22, 2025, and where invoices were issued or payments were made on or after that date. For Engineering, Procurement, and Construction (EPC) contracts, the Commission retained the standard deemed valuation formula of 70:30. Under this arrangement, the reduced GST rate of 5% will apply to the 70% goods portion of the contract, while the remaining 30% service portion will continue to attract GST at 18%.

To implement the order, power generators and the state’s distribution utilities, including Jaipur Discom, Ajmer Discom, Jodhpur Discom, and Rajasthan Urja Vikas & IT Services Ltd (RUVITL), have been directed to carry out a detailed reconciliation of the tax savings. Generators must submit project-wise financial statements certified by a Chartered Accountant or Statutory Auditor, showing the exact benefit received from the GST reduction.

The Commission has directed that these financial adjustments be completed within 90 days from the date of the order or from the availability of invoices, whichever is applicable. The verified savings must be reflected in monthly power tariffs so that consumers receive the benefit without delay.

RERC also clarified that cases already decided regarding the 2021 GST increase will not be reopened. However, all pending and future tariff adoption cases must account for the tax savings resulting from the 2025 GST reduction. If any dispute arises over the calculation of the savings, the concerned parties may approach the Commission for further adjudication.