MERC Rejects Rs.47.75 Cr Solar GST Claim Over Delay
The Maharashtra Electricity Regulatory Commission (MERC) has dismissed a petition filed by Avaada MH Sustainable Private Limited (AMHSPL), which had sought compensation for increased project costs due to changes in Goods and Services Tax (GST) rates. The company had requested around Rs.47.75 crore, citing additional expenses and carrying costs arising from GST notifications issued in late 2021.
The dispute relates to GST notifications dated September 30, 2021, and October 14, 2021, which increased the tax on solar power generating systems from 5% to effective rates of 12% and 13.8%. AMHSPL argued that this increase qualified as a “Change in Law” under its Power Purchase Agreement (PPA) with Maharashtra State Electricity Distribution Company Limited (MSEDCL). Based on this claim, the company sought compensation for the additional financial burden it said it had incurred. According to AMHSPL, the GST hike led to an extra cost of Rs.33.83 crore under its Module Supply Agreement and Rs.13.92 crore under its Engineering, Procurement, and Construction (EPC) contract.
However, a key issue in the case was the timing of the “Change in Law” notice submitted by the petitioner. As per Article 9.3.1 of the PPA, any affected party must issue a notice within seven days of becoming aware, or when it should reasonably have become aware, of such an event. While the GST changes came into effect in late 2021, AMHSPL submitted its first formal notice only on September 16, 2022, almost a year later.
AMHSPL defended this delay by stating that it became fully aware of the financial impact only after receiving clarified invoices from its contractors in September 2022. The company argued that it issued the notice within the required seven-day period from the date of this clarification. In response, MSEDCL maintained that GST changes are statutory in nature and publicly available, and therefore, the company should have been aware of them at the time they were notified. It also pointed out that AMHSPL’s suppliers were related entities, suggesting that the petitioner had access to relevant information much earlier.
After reviewing the arguments and evidence, the Commission sided with MSEDCL. It was observed that the seven-day notice requirement under the PPA is a mandatory condition that must be strictly followed. The Commission noted that AMHSPL had been receiving invoices reflecting the revised GST rates as early as October 2021, indicating that the company was aware, or should have been aware, of the changes at that time.
Based on these findings, MERC concluded that AMHSPL failed to comply with the contractual requirement of timely notification. As a result, the Commission ruled that the company was not eligible for compensation and dismissed the petition.
