GST Update 2025: Solar Panels & Renewable Energy Now at 5% The 56th GST Council meeting held on September 3, 2025 , chaired by Finance...
GST Update 2025: Solar Panels & Renewable Energy Now at 5%
The 56th GST Council meeting held on September 3, 2025, chaired by Finance Minister Nirmala Sitharaman, has delivered a game-changing update for India’s clean energy sector. Under the simplified two-slab GST system (5% & 18%), the Council approved a major rate cut:
- The GST on solar panels, PV cells, and renewable energy equipment has been reduced from 12% to 5%.
- Effective date: September 22, 2025.
This update is expected to significantly reduce project costs, encourage faster adoption of solar energy, and bring India closer to its 500 GW renewable energy target by 2030.
What Exactly Changed?
Before GST Update 2025
- Solar panels, PV cells, and inverters attracted 12% GST.
- Windmill parts, biogas plants, and other renewable devices were also at 12%.
- EVs were at 5% GST, and lithium-ion batteries at 18%.
After GST Update 2025 (Effective Sept 22, 2025)
- Solar panels, PV cells, inverters, wind, and biogas devices → 5% GST.
- Hydrogen fuel cell vehicles → 5% GST.
- Non-lithium batteries (lead acid, sodium, flow batteries) → reduced rates (18% or 5% depending on classification).
- EVs remain at 5%.
- Most services (like EPC contracts) remain at 18%.
Why the Cut Matters
- Lower Project Costs
Solar projects allocate around 70% of costs to goods (modules, inverters, BoS). Cutting GST from 12% to 5% reduces total project costs by 8–10%, making solar tariffs more competitive.
- Relief from Inverted Duty
Previously, inputs sometimes carried higher GST than finished products, creating refund bottlenecks. With a flat 5% rate on RE devices, this problem eases, improving cash flow for manufacturers.
- Boost to Domestic Manufacturing
The government’s Atmanirbhar Bharat push for local solar cell and module production gets stronger, as lower GST makes Indian products more cost-effective compared to imports.
- Cleaner Energy Push
The inclusion of hydrogen fuel cell vehicles and battery technologies aligns taxation with India’s green mobility and storage ambitions.
Impact on Stakeholders
Solar Developers
- EPC (Engineering, Procurement & Construction) companies will see reduced cost of goods.
- Service portion (installation, commissioning) stays at 18%, but overall tax incidence drops.
Consumers
- Rooftop solar installations for homes and MSMEs become cheaper, improving ROI.
- Payback periods shorten by 1–2 years depending on system size.
Manufacturers
- Module and inverter makers benefit from better pricing competitiveness.
- Export potential rises due to stronger domestic demand.
Investors & Lenders
- Lower project costs = lower tariffs = higher adoption, making solar projects less risky for banks/financiers.
Comparative Table: Before vs. After
Compliance Checklist for Businesses
✅ Update GST rates in ERP/accounting software from Sept 22, 2025.
✅ Reprice ongoing bids and contracts to pass on benefits of lower GST.
✅ Adjust inventory and ITC calculations — stock purchased at 12% GST but sold after Sept 22 will need reconciliation.
✅ Check official CBIC notifications for exact HSN code applicability.
✅ Train finance, sales & procurement teams on revised GST treatment.
Frequently Asked Questions (FAQs)
Q1. What is the new GST rate on solar panels in India?
➡️ 5% GST (down from 12%), effective September 22, 2025.
Q2. Does the GST cut apply to rooftop solar systems for homes?
➡️ Yes, solar panels, PV cells, and inverters are taxed at 5%, reducing rooftop solar costs.
Q3. Are EPC contracts also taxed at 5%?
➡️ No. Goods (panels, inverters) are 5%, but services (installation, EPC) remain at 18%.
Q4. Will EVs get cheaper after this update?
➡️ No change. EVs already enjoy 5% GST, which continues.
Q5. How does this support India’s renewable goals?
➡️ The reform lowers capex for solar and wind, supports hydrogen tech, and aligns with India’s 500 GW renewable target by 2030.
Conclusion
The GST Update 2025 is one of the most significant reforms for India’s renewable energy sector. By reducing GST on solar panels, PV cells, and renewable devices from 12% to 5%, the government has lowered costs, improved competitiveness, and strengthened clean energy adoption.
This move supports domestic manufacturing, rooftop solar adoption, and India’s global climate commitments. While EPC services still face 18% GST, the overall tax burden for renewable projects is now lighter, paving the way for faster growth in solar rooftops, large-scale projects, and green mobility.
🌞 In short: Solar energy in India just got cheaper, cleaner, and more accessible — thanks to GST 2.0.
🔗 Reference Sources:
- Times of India – GST rate cuts announced by FM Sitharaman
- Reuters – India’s GST to have only two slabs
- Economic Times – GST 2.0: What gets cheaper
- LiveMint – GST cut on solar & renewable devices
- Financial Express – GST cut to reduce costs & tariffs
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