Petition Questions SECI's Annuity Method for Dispensing Solar GST Claims

A petition filed before the Central Electricity Regulatory Commission has sought clarification on the Goods and Services Tax compensation for the costs incurred beyond the date of commissioning of a project. The petitioner has argued that the compensation should be made based on the actual costs incurred and not based on the weightage of the components of the capital cost. In March 2020, the Solar Energy Corporation of India had proposed that payments towards GST claims should be made by way of an annuity. The SECI had calculated the monthly annuity payment, with a proposed annuity rate of 10.41% for the entire 100% of additional capital expenditure incurred by the petitioners on account of the 'Change in Law' event. However, the rate of 10.41% was applicable only for the debt part (70%) of the additional CAPEX, whereas, it was30% for the equity part. This proposal was not well received, and petitioners claimed the calculation method was not in line with the CERC Renewable Tariff Regulations. The petition in their submission has also stated since the monthly annuity payment towards the petitioners' GST claims must be paid from the commercial operation date of the project, the first instalment of the payment by SECI which will be a lump sum should also include a late payment surcharge. The SECI in response has stated that petitioners can't claim any taxes on the revenue accruing to them on those GST claims, as they are accruing by way of interest from SECI and that they have already passed on the benefits to the petitioners by making payment in one lump sum amount from the commercial operations date of the project. The final order on this matter is yet to be delivered.