In a fillip to the solar industry, the Central Electricity Regulatory Commission (CERC) has issued an order to compensate developers with an upfront, one-off, lump sum payment as compensation for the increase in their capital expenditure after the application of Goods & Services Tax (GST) to PV projects since July 2017.
According to the commission, any change in domestic duties, levies, cess or taxes imposed by the federal or state governments, union territories or government instrument after the award of bids, may be treated as a ‘change in law’.
Compensation for increased input costs due to GST needs to be claimed from state or central electricity regulatory commissions, as appropriate. Claims should be paid within 60 days or will attract a late payment surcharge, as provided for by the relevant PPA, the CERC ruling added.
GST factored in to future projects
The commission has also mandated government agencies to make adjustments in the quoted tariff due to any additional operating and recurring expenditure developers incur for the term of the project because of GST application.
For future bids, developers can add GST as a portion of their cost structure while quoting. The tax laws will be applicable in all cases except in the case of a generating company where the date of commissioning was before July 1, 2017.
The GST rate on solar power generating systems and the raw materials used in them, including modules, has been notified at 5% of the value of goods. Other items – such as inverters, cement and cables – fall into the 18% GST bracket. Services such as works contracts and technology will also attract the higher rate.