Who benefits from lower solar taxes? APERC says consumers should

The Andhra Pradesh Electricity Regulatory Commission (APERC) has directed that the financial benefits arising from reductions in Basic Customs Duty (BCD) on imported solar modules and Goods and Services Tax (GST) on renewable energy devices be passed on to consumers through the state’s distribution companies.

In a suo motu order issued on June 23, 2026, the Commission recognised both tax reductions as Change in Law events under Power Purchase Agreements (PPAs) approved or adopted under Sections 62 and 63 of the Electricity Act, 2003. The order applies to renewable energy generators supplying power to Andhra Pradesh Southern Power Distribution Company Limited (APSPDCL), Andhra Pradesh Central Power Distribution Corporation Limited (APCPDCL) and Andhra Pradesh Eastern Power Distribution Company Limited (APEPDCL).

Tax reductions recognised as Change in Law

The Commission recognised the reduction in the effective BCD on imported solar modules from 44% to 40%, effective February 2, 2025, and the reduction in GST on renewable energy devices and components from 12% to 5%, effective September 22, 2025, as Change in Law events.

For the customs duty benefit, the Commission said it would apply where the bid submission date is prior to February 2, 2025, and the relevant invoice is issued on or after that date, or where the payment and corresponding tax discharge occur on or after February 2, 2025.

Similarly, the GST benefit will apply where the bid submission date is prior to September 22, 2025, and the invoice is issued on or after that date, or where the payment and tax discharge occur on or after September 22, 2025.

The Commission observed that Change in Law provisions apply to both increases and decreases in statutory levies, meaning that reductions in taxes and duties should also be passed through to procurers and ultimately to consumers.

The order also refers to previous rulings of the Central Electricity Regulatory Commission (CERC), including its orders in Petition No. 214/MP/2021, Petition No. 219/MP/2023 and Petition No. 13/SM/2025, which recognised changes in BCD and GST on renewable energy equipment as Change in Law events.

Implementation mechanism

APERC has prescribed a three-step mechanism for implementing the order.

Within 60 days of the order, eligible generating companies must submit project-wise details of invoices, the taxes originally paid, the revised taxes applicable and the resulting savings. The information must be certified by a Statutory Auditor or Chartered Accountant.

The three DISCOMs must verify and reconcile the claims within 30 days of receiving complete information. The corresponding tariff adjustment or financial settlement is to be completed within 30 days after reconciliation.

For composite Engineering, Procurement and Construction (EPC) contracts, the Commission directed that valuation should be carried out in accordance with the GST framework notified following the recommendations of the 31st GST Council, including the prescribed allocation between goods and services.

Background and directions

The order follows a series of developments at the central level. On December 31, 2025, the Ministry of Power informed all State Electricity Regulatory Commissions that the GST reduction constituted a Change in Law event and requested appropriate regulatory action to ensure the timely pass-through of benefits to consumers.

The Ministry also convened a meeting with Secretaries of State Electricity Regulatory Commissions on April 16, 2026, to encourage a uniform approach across states. Subsequently, on June 4, 2026, Solar Energy Corporation of India Limited (SECI) requested APERC to take suo motu cognisance of both the BCD and GST reductions and establish a mechanism for passing the benefits to procurers and consumers.

APERC has directed that the benefits be passed on by generating companies to the Andhra Pradesh DISCOMs and ultimately to consumers. It also stated that the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021 will apply wherever relevant.

The Commission clarified that disputes relating to the applicability, quantification or implementation of the benefits may be brought before it under Section 86(1)(f) of the Electricity Act, 2003, and that parties remain free to seek project-specific adjudication where required.

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