The government has reduced the GST on solar panels and other renewable energy products from 12% to 5%, effective September 22, 2025. This is a major push to make clean energy more affordable and accelerate India’s climate goals.
Items Covered Under Lower GST
The reduced 5% GST applies to:
- Solar panels, cookers, lanterns, and water heaters
- Photovoltaic cells and solar power generators
- Windmills, tidal energy devices, waste-to-energy plants
- Hydrogen fuel-cell-powered vehicles
How Much Consumers Will Save
The reduction directly lowers the upfront cost of renewable energy systems. For example:
Item
Old GST
Old Total Cost
New GST
New Total Cost
Savings
Rs 80,000 solar system
12% (Rs 9,600)
Rs 89,600
5% (Rs 4,000)
Rs 84,000
Rs 5,600
Key point: Savings depend on whether solar companies pass the full tax benefit to buyers.
Why This Matters
- Makes renewable energy systems more affordable for households and businesses.
- Supports India’s climate and energy independence goals.
- Encourages adoption of clean energy and reduces reliance on fossil fuels.
Challenges for Manufacturers
- Inverted duty structure: raw materials for clean energy products are taxed higher than finished goods, causing excess input tax credit (ITC) to get stuck.
- The government plans to streamline refund mechanisms to help manufacturers maintain smooth cash flow.
Broader GST Simplification
- GST slabs reduced from four to two main rates:
- 5%: Essentials and clean energy items
- 18%: Most other goods and services
- Luxury and sin goods remain at 40%.
- This simplification makes everyday essentials and electronics more affordable for consumers.
✅ Bottom Line: Consumers can save thousands on solar installations, making clean energy adoption more practical. While manufacturers may face challenges, the move is a significant step toward affordable, sustainable energy in India.
Disclaimer:
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.
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