CERC Awards Compensation To Avaada For Increased GST Rates

In its latest judgment, the Central Electricity Regulatory Commission (CERC) allowed compensation to Avaada Sustainable RJProject Pvt Ltd. (ASRPL) due to increased GST rates on solar equipment. The order was passed after the subsidiary of Avaada moved the Central Commission, citing an increase in its project cost due to an increase in the GST rates after it submitted its bid for the project. 

As per the details of the project, the Solar Energy Corporation of India (SECI) issues tenders seeking developers to develop solar projects in Rajasthan. Avaada won the tender to develop a 300 MW solar project at Noorsar village in the Bikaner district of Rajasthan. 

Avaada Sustainable submitted its bid on October 18, 2019, offering a Rs 2.71/unit tariff. However, the Finance Ministry notified an increase in the GST rates on solar projects and equipment on September 20, 2021. 

“Further, the additional amount incurred by ASRPL in developing the project on account of the issuance of the GST Amendment Notifications is approximately Rs. 56,41,91,774 under the Module Supply Agreement (Supply Contract) and Rs. 7,20,07,720 under the EPC Contract (Works Contract), cumulatively amounting to Rs. 63,61,99,494,” submissions by Avaada Sustainable said. 

Final CERC order

ASRPL, in its petition before the CERC, pleaded with the Central Commission to consider this as a ‘change of law’ event and award compensation accordingly. The CERC, in its judgment, categorized the GST notification as a ‘change of law’ and awarded compensations to the green energy company. 

“The bid was submitted by the Petitioner on 18.10.2019. The e-Reverse auction was conducted on 31.10.2019. PPA was executed between the Petitioner and SECI on 08.06.2020, and the SCoD of the project was 11.11.2021. In terms of the extended SCoD, the project was required to be commissioned on or before 12.05.2022. The Petitioner commissioned the full capacity of its project on 11.05.2022, whereas the 2021 GST Notifications were notified on 30.09.2021. As such, the Petitioner’s project was affected by the impugned Notifications and is entitled to relief under the GST Laws as per the terms of Article 12 of the PPA,” the CERC order said.

It also asked the parties to reconcile additional expenditures and costs by exhibiting a clear and one-to-one correlation with the projects and the invoices raised, supported by an auditor certificate.