The payment cycle in an Indian solar EPC project is the sequence of when the EPC receives customer money versus when it must pay its own costs, with Indian specifics layered in. The customer typically pays an upfront advance, then milestone payments (such as at material delivery, mechanical completion and commissioning), with a retention amount held back and released after a performance period. Meanwhile the EPC pays for materials upfront, often including import duties like BCD and GST, before most customer payments arrive. This mismatch, upfront material, duty and GST outflows against staged, partly-retained customer payments, creates the cash-flow gap that defines Indian EPC finance, and it is why EPCs use financing and milestone negotiation to manage the timing.
”- The payment cycle is when the EPC receives customer money versus when it pays its costs.
- Customers pay an advance, then milestones, with retention held back after a performance period.
- The EPC pays for materials upfront, often including BCD duty and GST, before customer payments.
- This mismatch creates the cash-flow gap at the heart of Indian EPC finance.
- EPCs manage it through milestone negotiation and financing the upfront outflows.
What the payment cycle is
The payment cycle of an Indian EPC project is the timeline of money in (from the customer) versus money out (to suppliers, for duties, GST and labour). The gap between these two schedules is what every EPC finance decision turns on. In the Indian context, the money-out side has extra components, import duties and GST, that must be funded around the material purchase, which makes understanding the cycle even more important.
How customers pay: advance, milestones, retention
Customer payments in Indian EPC projects generally follow the advance-milestone-retention pattern. There is usually an upfront advance on contract signing. Payments are then released at defined milestones as the project progresses, commonly at material delivery, mechanical completion and commissioning. Finally, a retention amount is held back and released only after a performance or defects-liability period following commissioning. So the customer's money arrives in stages, with a portion delayed well past completion.
How costs go out: materials, duty and GST upfront
The EPC's costs come earlier and, in India, carry extra elements. Materials, the largest cost, must generally be paid at or before delivery, and for imports this includes duties like BCD paid at customs. GST on purchases is an outflow around the same time, with input credit realised on a different timeline. Labour is paid as work proceeds. The result is that materials, duties and GST are largely funded before the corresponding customer milestone payments arrive, and well before retention is released.
The gap and how to manage it
The mismatch, upfront material, duty and GST outflows against staged, partly-retained inflows, is the cash-flow gap at the heart of Indian EPC finance. It is why a profitable Indian EPC can still run short of cash. EPCs manage it by negotiating larger advances and better milestone timing with customers, planning for GST and retention explicitly, and using financing, purchase-order and vendor-payment finance, to cover the upfront material and duty outlay rather than funding it from reserves. Understanding your payment cycle precisely, including the Indian duty and GST timing, is what lets you arrange that financing before the gap bites.
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