GST on solar cells, modules cut to 5%

India’s Goods and Services Tax (GST) Council has announced a reduction in the GST rate on solar cells—whether or not assembled into modules—from the current 12% to 5%. The revised rates will take effect from September 22.

The tax cut is expected to make solar cells and modules more affordable, driving greater adoption of solar power systems among residential, commercial, and industrial consumers. As costs become more viable, the move is likely to accelerate the transition toward renewable energy.

The GST Council has also reduced the tax rate to 5% for other renewable energy devices and parts used in their manufacture. These include solar power-based devices and generators, solar cookers, solar lanterns or solar lamps windmills, wind-operated electricity generators, waste-to-energy plants and devices, biogas plants, and ocean waves or tidal wave energy devices and plants.

Girishkumar Kadam, senior vice president & group head, ICRA Ltd, expects the rationalisation of GST rates for solar PV modules and wind turbine generators to reduce the capital cost for solar and wind power projects by 5%. This is expected to reduce the cost of generation for solar power projects by 10 paise per unit (kWh) and for wind power projects by 15-17 paise per unit.

Kadam said, “[The move] would reduce the capital cost for under-implementation projects and also likely to reflect in upcoming bids. This in turn will benefit the power distribution companies in the form of lower power purchase cost, going forward.”

Amit Paithankar, CEO and Whole-time Director, Waaree Energies Ltd, said: “The recent GST rationalization reflects the government’s commitment to India’s clean energy transition. The reduction of GST on renewable energy devices and equipment to a uniform 5% will lower project costs and accelerate the capacity addition needed to meet India’s clean energy targets. It also sends a strong signal to investors, improving the financial viability and attractiveness of the renewable energy sector.

“Moreover, this development will directly help reduce the overall cost of solar modules. While the exact reduction will depend on project specifications and configurations, customers can expect a tangible decrease in module prices, further strengthening the case for solar adoption. The move will also help expand solar adoption in households across the country, supporting the implementation of the PM Surya Ghar Yojana.”

Addressing potential concerns, Paithankar said, “While the new rate may temporarily increase the issue of inverted taxation, we are confident that the government’s focus on faster Input Tax Credit (ITC) refunds will help address this. Overall, these GST reforms will reduce the cost of green power for consumers, strengthen the domestic manufacturing value chain, create jobs, and promote energy independence.”

Gautam Mohanka, director, Gautam Solar, called the GST cut decision a pivotal step in accelerating India’s clean-energy transition. He added that this significant reform greatly increases the accessibility of solar installations for households, businesses, and farmers across the country. At a time when India and the world are facing extreme weather events, rising temperatures, and erratic climate patterns, the need to decarbonize our energy systems is urgent. By reducing this financial barrier, the government is making solar power more affordable and enabling faster adoption, which will directly help cut carbon emissions and reduce dependence on fossil fuels.

Dhruv Sharma, CEO, Jupiter International Ltd, said, “The GST Council has taken a historic step to reduce taxes on renewable energy components to 5% from 12%. This move not only brings down the cost of solar and clean energy solutions but also energizes the entire ecosystem—manufacturers, developers, and end users alike. It will also help in India’s clean energy momentum and make sustainable solutions more accessible to millions.”

Ratul Puri, Chairman, Hindustan Power, said this reform reaffirms the government’s commitment to building a robust and future-ready power ecosystem. He added, “As an integrated energy company with a strong presence in both transitional and renewable energy generation, we believe this step will not only ease operations across the value chain but also strengthen India’s transition towards sustainable energy. While the tax rate on coal has been raised from 5% to 18%, the overall impact will be minor as the existing compensation cess of Rs 400 per tonne has now been subsumed within the GST rate. However, to support the transition from fossil fuels to non-fossil sources, the reduction of GST on renewable sector products from 12% to 5% is truly transformative. It will further enhance renewable energy capacity and accelerate the adoption of green technologies such as biogas, solar cells, green hydrogen and battery energy storage systems.”

Oyster Renewable Energy (a hybrid IPP player), said, the GST cut “significantly lowers the input costs for project development and module manufacturing, thereby enhancing the overall economics of renewable energy projects. This tax rationalization is particularly timely as it coincides with India’s ambitious targets for domestic manufacturing self-reliance under the Atmanirbhar Bharat initiative and the ongoing efforts to scale up green hydrogen mobility solutions. Lower GST rates will most definitely stimulate project pipeline growth by making renewable power generation more cost-competitive, thereby fostering stronger demand from distribution companies and corporate buyers alike.”

Bhatia said that addressing the inverted duty structure with expedited refund mechanisms will streamline liquidity for manufacturers and developers, easing cash flow allowing faster capacity expansion.

This content is protected by copyright and may not be reused. If you want to cooperate with us and would like to reuse some of our content, please contact: editors@pv-magazine.com.