The recent approval of the Goods and Service Tax (GST) claims for solar power developers by the Central Electricity Regulatory Commission (CERC) is a major development, as per research and rating agency ICRA. 'However, the timely release of the allowed compensation by the respective state-owned distribution utilities (being the main off-takers) remains crucial. About 10.9 GW solar power capacity has been commissioned between July 2017 and September 2018, with most of the projects being awarded prior to July 2017,' said <span style="font-weight: bold;">Sabyasachi Majumdar, Group Head and Senior Vice President-Corporate Ratings, ICRA.</span> <p></p> <p>CERC had issued an order approving the claims raised by solar power developers related to the impact of the introduction of GST on the capital cost of solar power projects. The commission approved the claims under the change in law, and thus, allowed the relief, which is required to be recovered as a one-time payment on the GST front from the off-takers.</p> <p>This relief has been allowed for projects that are not commissioned prior to July 1, 2017. However, CERC stated that the developers must exhibit clear and a one-to-one correlation between the projects, the supply of goods or services and the invoices raised by the supplier of goods and services backed by auditor certificate. </p> <p>However, the claims related to the impact of GST on O&amp;M expenses was not allowed by CERC.</p> <p>ICRA also stated that the introduction of GST regime had a negative impact on solar power projects due to increase in capital cost arising from higher tax rate applicable under GST, given that the solar power sector has been availing exemptions and concession rates on excise duty, customs duty and VAT for procurement of PV modules, mounting structures and electrical equipment, etc. </p> <p>'While CERC in its order has allowed the applicable GST at 5 per cent on the PV modules, there continues to be an ambiguity on GST rate applicable on PV modules supply under EPC contract, given the recent ruling of 18 per cent GST on solar EPC projects by the Authority of Advance Ruling (AAR) in Maharashtra. </p> <p>In this context, clarity is required on the applicable GST rate on PV modules for the sector,' Majumdar added.</p>