The Maharashtra Electricity Regulatory Commission (MERC) has rejected Avaada MH Sustainable’s (Avaada Energy) petition seeking compensation of ₹477.5 million (~$5.09 million) for additional expenditure incurred due to a change-in-law event arising from an increase in Goods and Services Tax (GST).

The Commission said that Avaada failed to notify Maharashtra State Electricity Distribution Company (MSEDCL) regarding the change-in-law event within the stipulated time as per the power purchase agreement (PPA).

Background

MSEDCL issued a tender to procure 500 MW of power from intrastate solar power projects.

Avaada won 250 MW at a tariff of ₹2.9 (~$0.03)/kWh in the auction, and the PPA was signed in August 2021.

After signing the PPA, the Ministry of Finance raised GST from 5% to 12% and 13.8% for the modules and the engineering, procurement, and construction (EPC) portion of the contract, respectively.

The project was commissioned by November 3, 2022.

Avaada requested MSEDCL to acknowledge a change-in-law event on September 16, 2022.

It told the Commission that the GST rate on solar modules increased from 5% to 12%, and the GST on the EPC contract (70% of the contract value) was raised to 12%. It added that the remaining portion of the contract value was subject to a 18% GST tax.

Avaada added that it had to incur an additional expenditure of ₹477.5 million (~$5.09 million), comprising ₹338.27 million (~$3.6 million) for module supply and ₹139.22 million (~$1.48 million) for the EPC portion of the contract.

However, MSEDCL said that Avaada intimated it of the change in the event nearly one year after the GST revision, whereas, as per the PPA, such notices must be issued by the developer within seven days. It argued that Avaada was not eligible to claim compensation on ground of the change-in-law.

Commission’s Analysis

The Commission noted that the PPA was signed on August 10, 2021, and that MSEDCL was notified of the change-in-law event a year later. It said the time Avaada took to notify the change-in-law exceeded the seven days stipulated under the PPA.

The Commission further said that even if Avaada was unaware of the GST revision at the time of project commissioning, it would have known when the project was commissioned.

It noted that Avaada had received several invoices with the revised GST in 2021, which invalidates the company’s claim about being unaware of the GST revision.

Since Avaada failed to comply with the mandatory conditions of PPA, the Commission ruled that Avaada was not eligible to claim compensation.

In 2025, the Central Electricity Regulatory Commission issued a suo motu order directing that monthly tariffs or charges must be adjusted or refunded from the date the GST reduction event occurs, affirming that renewable energy generators must pass on the benefit of lower tax rates to procurers.

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