DISCOMS to Pay Rs. 2,000 Cr to Solar Developers as GST Relief

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DISCOMS will have to pay 2,000-crore relief to solar developers within 60 days of issuance of the order and add extra charges if delayed

Distribution companies (DISCOMS) have been directed to pay a one-time compensation of Rs. 2,000 crores against the Goods and Services Tax (GST) impact to solar developers across India. The amount will be paid to solar projects that were not commissioned before July 1, 2017.

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Sabyasachi Majumdar, Group Head & Senior Vice-President – Corporate Ratings, Information and Credit Rating Agency (ICRA) said that considering 75 per cent of the capacity commissioned, the one-time relief towards GST impact to be paid by DISCOMS to solar power developers is estimated at about Rs 2,000 crore on an all-India level.

Around 10.9 GW of solar power capacity was commissioned between July 2017 and September 2018. Most of these projects were awarded to the developers prior to July 2017.

Late charges

The amount of Rs. 2,000 crores are to be paid within 60 days of the order passed and delay in disbursing the amount will add extra charges as mentioned in the power purchase agreements (PPAs), a Businessline report said.

GST impact on developers

The goods and services tax had introduced a tax rate for photovoltaic modules, mounting structures and electrical equipment that were earlier exempted from tax and duties or were subsidised. Tax rate categorisation of solar projects under the tax bracket of 5 or 18 per cent was also not clear, which is why it affected the solar power developers. Many of the investors are believed to avoid bidding for setting up projects due to GST implementation.

The compensation has come after solar power majors, ACME and Azure Power filed petitions regarding the GST impact. The ICRA head said that timely release of the relief by the DISCOMS is crucial.

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