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50 GW of Renewable Projects May Face Tariff Revisions After GST Cut

India’s renewable energy sector may witness tariff revisions following the government’s decision to reduce GST on renewable energy equipment from 12% to 5%. Developers with nearly 50 GW of recently awarded projects could face tariff renegotiations, as the reduction qualifies as a “Change in Law” event under regulatory provisions.

Historically, in 2021, when GST on solar modules was increased from 5% to 12%, the CERC ruled in favor of developers, granting compensation to restore their financial position. Applying the same principle in reverse, discoms are now expected to demand lower tariffs to reflect reduced project costs.

According to JM Financial, the GST cut is structurally positive, lowering developers’ capex and supporting cheaper tariffs in future auctions. However, for ongoing projects, it adds uncertainty. Out of 158.45 GW under construction (74.15 GW solar, 30.08 GW wind, 53.75 GW hybrid), around 50 GW may be directly impacted.

The cost implications are significant: a 320 MW FDRE project now sees total costs fall from Rs4,750 crore to Rs4,440 crore, with GST liability reduced by over 50%, translating to tariffs dropping from Rs4.5/unit to Rs4.2/unit. While positive for discoms and consumers, developers face another regulatory hurdle alongside ISTS waiver rollbacks, curtailments, and localization rules.