MERC Dismiss Tata Power’s Petition for GST Compensation
Tata Power Renewable Energy Limited (TPREL) filed a petition to Maharashtra Electricity Regulatory Commission (MERC) seeking Goods & Services Tax (GST) compensation. The commission released its final decision on this case on April 30, 2021 in which TPREL’s plea was dismissed.
TPREL filed the initial petition on January 23, 2021 and later filed an amended petition under Miscellaneous Application on October 28, 3030.
The petitioner sought compensation due to an increase in cost on account of a change in the rate of GST amounting to a change in Law event in terms of the Power Purchase Agreement (PPA).
The commission noted that although a change in GST rate is clearly beyond the control of contracting parties, in the opinion of the Commission, TPREL could have controlled the expenses on taxes.
MERC also noted, “MSEDCL’s submission n that other successful bidders, in the same bidding process have not approached with such request of compensation on account of GST notification issued in December 2018.
This established that present claim of an increase in expenses due to 2018 GST notification is not related with change in tax rate but it is linked with the contracting practice of the successful bidder.”
MERC also said that TPREL lost the opportunity of using a legitimate lower tax rate of 5 percent by not entering into a most appropriate manner of contract for the supply of goods. Thus, TPREL’s contracting practices cannot be considered economical and prudent.
Further, the commission said that it would have been economical and prudent for TPREL to place goods supply contract directly with manufacturers of solar modules and other allied equipment. TPREL could have placed a separate contract with Tata Power Solar System Limited for services such as erection, testing and commissioning. Click here for more information.
