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CERC Declares GST Rate Cut on Renewable Energy Devices as Change in Law

The Central Electricity Regulatory Commission has passed a suo-motu order recognising the recent GST cut on renewable energy components from 12 percent to 5 percent as a ‘Change in Law’ and has directed developers to pass on the benefits to Discoms and ultimately to consumers.

November 19, 2025. By Mrinmoy Dey

The Central Electricity Regulatory Commission (CERC) has taken suo motu cognisance of the recent reduction in GST on renewable energy devices, directing renewable energy (RE) generators and distribution companies (DISCOMs) to pass on the benefit through corresponding tariff adjustments.

Ministry of Finance reduced GST on renewable energy devices and their components from 12 percent to 5 percent, effective September 22, 2025. The change, CERC held, directly lowers project costs and therefore qualifies as a ‘Change in Law’ event under power purchase agreements (PPAs).

The regulator emphasised that the benefit must be transferred to DISCOMs and consumers, citing anti-profiteering provisions under Section 171 of the GST Act. The order clarifies that the revised GST rate will apply to all projects where the bid submission date precedes September 22, 2025, and where invoices for goods or services are raised or payments received on or after the effective date. CERC also reiterated that a clear one-to-one correlation must be established between each project, the supplies procured, and the corresponding invoices.

CERC directed RE developers and DISCOMs to reconcile the impact of the tax reduction at their level before approaching the Commission for ‘Change in Law’ approval, in line with the 2021 ‘Change in Law’ recovery rules. Generators will need to furnish supporting documentation, backed by auditor certification, to demonstrate the reduction in expenditure.

The Commission noted that the GST cut follows earlier changes in 2017 and 2021, which had raised the applicable rates on solar and other RE components from 5 percent to 12 percent, prompting multiple Change in Law claims across the sector.

With this order, CERC has cleared the path for tariff recalibration across central and interstate RE projects, ensuring that the GST reduction translates into lower costs for procurers and consumers while maintaining transparency and compliance in project execution.

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