The Punjab State Electricity Regulatory Commission (PSERC) has rejected petitions filed by two solar power developers seeking additional compensation from the Punjab State Power Corporation Limited (PSPCL) for higher Goods and Services Tax (GST) costs on land lease rentals.
The petitions were filed by Vector Green Sunshine Private Limited and Vector Green Surya Urja Private Limited. Both companies operate 20 MW solar photovoltaic projects in Punjab. Their projects were awarded through a competitive bidding process conducted by the Punjab Energy Development Agency (PEDA) and are governed by long-term Power Purchase Agreements (PPAs) signed in 2014 and 2015.
The dispute began after a Ministry of Finance notification dated October 8, 2024, introduced an 18 percent GST under the Reverse Charge Mechanism (RCM) on immovable property rented from unregistered persons.
The two solar developers had leased private land from unregistered landowners for their projects. Following the tax change, they incurred additional GST liabilities on their land lease rentals. Vector Green Sunshine sought compensation of approximately Rs 41.14 lakh, while Vector Green Surya Urja claimed around Rs 18.16 lakh. The claims covered the additional liability up to December 2025, along with carrying costs and reimbursement for future expenses.
The developers argued that the additional GST burden should be treated as a “Change in Law” event. They maintained that although their PPAs did not contain a specific Change in Law provision, the Electricity (Timely Recovery of Costs due to Change in Law) Rules, 2021, could provide a basis for compensation.
The developers also argued that electricity regulators have the authority to provide relief when unforeseen government policies or taxes affect the financial position of renewable energy projects. According to them, passing through the additional GST cost was necessary to protect the financial viability of their projects.
PSPCL opposed the petitions. The state utility argued that the PPAs had fixed electricity tariffs for 25 years and clearly restricted additional payments beyond the agreed terms. PSPCL also maintained that choosing to lease land instead of purchasing it was a commercial decision taken by the developers. Therefore, any additional cost arising from that decision should not be passed on to electricity consumers.
In its order dated August 19, 2026, the three-member PSERC bench, comprising Sanjay Gupta, Ravinder Singh Saini and Ravi Kumar, ruled in favour of PSPCL.
The Commission held that the 2021 Change in Law Rules could not retrospectively alter the terms of contracts that were entered into before the rules came into force. It also stated that its regulatory powers could not be used to modify binding commercial agreements or provide compensation where such payments were not permitted under the original PPAs.
Accordingly, PSERC dismissed both petitions, leaving the solar developers responsible for the additional GST costs arising from their land lease arrangements.
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