India has lowered GST on solar components from 12% to 5%, a move that’s expected to reduce project costs significantly
Lower GST will aid renewable energy developers and ease discoms’ purchase expenses
Industry leaders welcome the reform as a boost to domestic manufacturing, storage adoption, and the Atmanirbhar Bharat vision
India’s Finance Ministry has slashed the Goods and Services Tax (GST) on solar energy components from 12% to 5% as part of a wider GST reform in the country. The move, approved by the GST Council at its 56th meeting, is expected to lower project costs while ensuring ease of doing business.
Renewable energy devices and parts for their manufacture that benefit from this revised rate of 5% include solar PV cells, whether or not assembled in modules or made up into panels, solar power-based devices, solar power generation, solar lantern/solar lamp, wind mills, and ocean waves/tidal waves energy devices/plants, among others.
“The rationalisation of GST rates for solar PV modules and wind turbine generators is expected 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 and for wind power projects by ~15-17 paise per unit,” explained Senior Vice President & Group Head, ICRA Ltd. on Renewable Energy, Girishkumar Kadam.
He added “This 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.”
The solar PV industry has largely welcomed the government’s decision to reduce the GST rate, viewing it as a move toward easing project costs and providing a much-needed boost to sectoral growth.
The Chairman and Managing Director of Vikram Solar, Gyanesh Chaudhary, said, “Lowering project costs will accelerate solar adoption across sectors and bring clean energy closer to millions of homes and businesses,” adding, “The GST cut gives a clear signal in support of Atmanirbhar Bharat, encouraging investment in solar cell and module production and reinforcing our path to self-reliance.”
Calling it a bold, landmark, and future-focused decision, Jakson Group Chairman Sameer Gupta said this will become a long-term enabler of domestic manufacturing. “While India has achieved significant milestones in solar module production, reliance on foreign imports for upstream components continues. Rationalising GST pricing creates a more competitive environment that encourages investment and supports the growth of a robust 'Made in India' solar supply chain,” stated Gupta.
Chaudhary also hailed the lowering of GST on lithium-ion battery from 28% to 18% as it will support the country’s grid stability as renewable energy grows.
He said, “Equally significant is the reduction in tax on non-lithium-ion batteries. As India increases its renewable energy generation, building scalable, long-duration energy storage solutions is critical for grid stability and round-the-clock power. This set of reforms goes beyond cost correction and reflects strategic intent. It strengthens India’s clean energy value chain and reinforces our position as a global leader in sustainable growth.”
In a list of FAQs on the revised GST slabs for renewable energy, the ministry stated, “While reducing the GST rate to 5% will deepen inversion, mechanism for refund arising out of inverted duty structure is available. In addition, process reforms will ensure expedited refunds. The objective is to promote renewable energy goods.”
The new rates will become effective from September 22, 2025, according to the Finance Ministry.
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