The Rajasthan Electricity Regulatory Commission (RERC) has held that the reduction in goods and services tax (GST) on renewable energy devices and parts from 12% to 5% will be treated as a change-in-law event under power purchase agreements (PPAs) signed in the state.

The revised GST rate took effect in September 2025.

The order applies to renewable energy generators that have signed PPAs with Jaipur Vidyut Vitran Nigam, Ajmer Vidyut Vitran Nigam, Jodhpur Vidyut Vitran Nigam, or Rajasthan Urja Vikas and IT Services.

RERC said the benefit of the GST reduction must be passed through to procurers and then to consumers on a net basis.

The revised GST rate will apply to bids submitted before September 22, 2025, and to invoices for the supply of goods or services raised on or after that date. It will also apply where payment for such supply was made, and GST was discharged on or after September 22, 2025, whether payment was made in part or in full.

The GST reduction covers biogas plants, solar power-based devices, solar power generating systems, wind mills, waste-to-energy plants and devices, solar lanterns and lamps, ocean wave or tidal energy devices, and photovoltaic cells, whether or not assembled into modules or panels.

For composite engineering, procurement, and construction contracts, RERC retained the existing deemed split of 70% for goods and 30% for services. The goods portion will attract GST at 5%, while the services portion will continue to attract GST at 18%.

The Commission said generators must submit project-wise statements to the procurer showing the relevant invoices, tax originally paid, tax now applicable, and the net saving. The statement must be supported by a certificate from a Chartered Accountant or statutory auditor to establish a clear one-to-one link between the project, the supply of goods and services, and the invoices raised.

The reconciliation must be carried out between the generator and the distribution licensee or RUVITL before either party approaches the Commission for further tariff determination.

RERC directed that the reconciliation and the corresponding adjustment to the monthly tariff or charges under the PPA must be completed within 90 days of the order date or the date the relevant invoice becomes available, whichever is later. The adjustment will take effect on September 22, 2025.

The Commission said the reconciliation will also apply to projects under construction as of September 22, 2025, and to commissioned projects where goods or services are supplied on or after that date, including spare parts and replacements under ongoing operation and maintenance, provided the bid submission date was before September 22, 2025, and a clear project-invoice linkage is established.

RERC said it had earlier treated the increase in GST from 5% to 12%, effective October 1, 2021, as a change-in- law event and allowed corresponding tariff relief to affected generators. It said the present reduction is a statutory measure of the same character, operating in the reverse direction.

RERC said several petitions are pending before it involving change-in-law relief related to the 2021 GST increase and the 2025 GST reduction. It said that petitions concerning the 2025 GST reduction will be governed by the principles set out in this order.

Petitions dealing with the upward revision of GST from 5% to 12% for the period from October 1, 2021, to September 21, 2025, will be examined on their own merits. However, RERC said that no relief will be granted for any costs incurred on or after September 22, 2025, at the earlier 12% GST rate.

In tariff determination proceedings under Section 62 and tariff adoption proceedings under Section 63 pending before the Commission, petitioners must place on record the impact of the GST reduction on the claimed project cost, supported by an auditor’s certificate, before the final hearing.

Any unresolved dispute between a generator and a procurer regarding the quantum or manner of pass-through may be brought before the RERC for adjudication.

The Central Electricity Regulatory Commission has also treated the GST rate cut on renewable energy equipment as a change- in-law event and directed that the benefit be passed on to procurers.

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