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

A petition filed by ACME Solar says the method is incorrect and against the CERC regulations

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A recent petition filed by ACME Jodhpur Solar Power Private Limited before the Central Electricity Regulatory Commission (CERC) sought clarification regarding the Goods and Services Tax (GST) compensation for the costs incurred beyond the date of commissioning of a project.

ACME had 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.

Context

In March, 2020, SECI proposed that the payments towards GST claims should be by way of an annuity – a series of payments made at equal intervals.

SECI reevaluated and calculated the monthly annuity payment, with the proposed annuity rate of 10.41% for the entire 100% of additional CAPEX (capital expenditure) incurred by the petitioners on account of ‘Change in Law’ event. However, the rate of 10.41% was applicable only for the debt part (70%) of the additional CAPEX, whereas, for the equity part, it was 30%.

However, this annuity method has not been well received. The petition called this method unfair and incorrect, adding that it is not in line with the CERC Renewable Tariff Regulations.

The petition also argued that the monthly annuity payment towards the petitioners’ GST claims must be paid from the commercial operation date (COD) of the project. Therefore, the first installment of the payment by SECI as a lump sum must include a late payment surcharge.

SECI argued that petitioners could not claim any taxes on the revenue accruing to them on those GST claims, which are accruing by way of interest from SECI. It has already passed on the benefits to the petitioners by making payment in one lump sum amount from the date of COD of the project, SECI claimed.

The Commission has already held that until the Change in Law claim is decided, and the documents are submitted by the petitioners, there is no late payment surcharge payable in terms of the PPA.

While the final order on the matter is yet to be delivered, SECI has been asked to file a rejoinder to this instant petition by July 7, 2020.

Recently, the CERC directed NTPC to pay the dues claimed by ACME Solar along with late payment surcharge within 30 days of the order. The payment was for reimbursing the sum that was incurred as additional capital expenditure after the introduction of GST Law.

ACME had filed a petition before the Commission for their non-compliance with the CERC’s earlier order asking NTPC and Karnataka and Telangana DISCOMs to pay the late payment surcharge as per the PPAs from January 15, 2019, which expired 60 days from the date of submission of the claim.

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