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The Central Electricity Regulatory Commission ("CERC"), in the matter of 'Abolition of GST Compensation Cess and increase in the GST rate on procurement of coal from 5% to 18%.', through its suo moto order dated 29.12.2025, has laid down a uniform framework for adjustment of financial impact arising from the abolition of compensation cess on coal and the increase in Goods and Service Tax ("GST") rate on coal from 5% to 18%, pursuant to Notification No. 9/2025-Central Tax (Rate) dated 17.09.2025 and Notification No. 2/2025 Compensation Cess (Rate) dated 17.09.2025 issued by the MoF, Government of India ("GST Notifications"). a
CERC noted that the GST Notifications constituted as change in law events under the power purchase agreements ("PPAs") having a composite scheme and covered under Section 63 of the Electricity Act, 2003 where the cut-off date is on or before 21.09.2025. Further, while observing that the increase in GST has a cost-escalating effect and the abolition of compensation cess has a cost-reducing effect, the CERC clarified that these are separate change in law events, which are to be computed independently but settled on a net basis. Consequently, CERC directed all generating companies to furnish the computation of net impact of the GST Notifications along with auditor's certificate and relevant documents.
The CERC also directed that any difference between the provisional and actual impact shall be reconciled as per the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021, and clarified that any dispute relating to computation may be raised before CERC.
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