UPERC Declares GST Cut On Renewable Equipment A 'Change in Law' Event For PM-KUSUM Projects
The Uttar Pradesh Electricity Regulatory Commission (UPERC) has declared the reduction in Goods and Services Tax (GST) on renewable energy devices and components from 12% to 5% as a 'Change in Law' event for projects implemented under the PM-KUSUM Component-C2 scheme, paving the way for lower tariffs and the pass-through of benefits to power consumers.
In a suo motu order dated June 23, 2026, the Commission said the GST reduction, which became effective from September 22, 2025, lowers the procurement cost of renewable energy equipment and consequently reduces the overall capital cost of solar projects developed under the feeder-level solarisation programme.
Date Of Bid Submission
The Commission noted that the last date for bid submission under the PM-KUSUM Component-C2 tender was January 9, 2025, well before the issuance of the Ministry of Finance's notification reducing GST rates. Since the tax revision occurred after the bidding process, it qualifies as a 'Change in Law' event under the provisions of the power purchase agreements (PPAs).
UPERC observed that any financial benefit arising from the lower GST rate must be passed on to the procurer, Uttar Pradesh Power Corporation Ltd (UPPCL), and ultimately to end consumers.
The order pertains to the procurement of 2,553.5 MW of grid-connected solar capacity under PM-KUSUM Component-C2 through a tariff-based competitive bidding process. Out of 1,002 substations identified under the scheme, letters of award have been issued for 566 substations aggregating 1,686.4 MW, while the Commission has so far approved 449 PPAs covering 1,355.5 MW of capacity.
To operationalise the tariff revision exercise, UPERC has directed the constitution of an expert committee for each discom. The committee will comprise representatives from UPNEDA, UPPCL and the concerned distribution company and will assess project-wise benefits arising from the GST reduction based on documentary evidence, including invoices, payment records and auditor certificates.
Claim Calculations
Project developers have been directed to submit calculations and supporting documents quantifying the impact of the GST reduction within 45 days of the commercial operation date (COD) of their projects. The expert committees will subsequently determine revised tariffs based on the actual benefits accrued due to the lower GST rate.
UPERC further directed UPPCL to execute supplementary PPAs incorporating the revised tariffs after completion of the assessment exercise. The utility has also been asked to develop a standardised format for collecting project data and calculating the financial impact of the GST reduction.
The Commission has mandated that UPPCL and project developers complete the entire assessment process and submit project-wise details before the regulator within 90 days of the commercial operation date of each project.
