GST on Solar Panels & Renewable Energy Equipment – GST Rates in India
Introduction
India’s renewable energy sector has witnessed remarkable growth over the past few years, with solar energy leading the transition towards clean and sustainable power. To further encourage the adoption of renewable energy, the Government has revised the GST rates on several renewable energy devices, making solar installations more affordable for businesses and households.
Whether you are a manufacturer, supplier, EPC contractor, or a business planning to install a solar power system, understanding the applicable GST rates is essential. It helps in estimating project costs, ensuring GST compliance, and claiming eligible Input Tax Credit (ITC).
Updated GST Rates on Solar & Renewable Energy Equipment
The GST rates applicable to major renewable energy equipment are as follows:
| Equipment | GST Rate |
|---|---|
| Solar Panels / PV Modules | 5% |
| Solar Cells | 5% |
| Solar Power-Based Devices | 5% |
| Solar Cookers | 5% |
| Solar Water Heaters | 5% |
| Windmills & Wind Turbine Components | 5% |
| Biogas Plants | 5% |
| Waste-to-Energy Devices | 5% |
| Standalone Batteries | 18% |
| Standalone Mounting Structures | 18% |
| Cables, Connectors & Other General Accessories | 18% |
The concessional 5% GST applies to notified renewable energy devices and specified parts used in their manufacture. However, products that are supplied separately and are not covered under the concessional notification—such as standalone batteries, cables, and mounting structures—generally continue to attract 18% GST.
GST on Solar Power Projects
A solar power project consists of multiple components working together, including solar panels, inverters, mounting structures, cables, transformers, and other electrical equipment.
The GST liability depends on the nature of the supply. If renewable energy devices covered under the notification are supplied, the concessional rate may apply. However, where components are supplied independently or the transaction is executed as a works contract, the applicable GST treatment may differ based on the provisions of the GST law. Businesses should evaluate the nature of each transaction before raising invoices.
Input Tax Credit (ITC)
Registered taxpayers can claim Input Tax Credit on eligible purchases used for business purposes, provided the conditions prescribed under the CGST Act are satisfied. To avoid disputes while claiming ITC, businesses should ensure that:
- A valid tax invoice has been issued by the supplier.
- The supplier has reported the invoice in GST returns.
- The goods or services have been received.
- GST returns are filed within the prescribed time limits.
Proper documentation and timely reconciliation help businesses maximize ITC and reduce compliance risks.
Why the GST Revision Matters
The reduction in GST on renewable energy devices is expected to lower the overall cost of solar installations and encourage wider adoption of clean energy across India. Lower taxes reduce the upfront investment required for solar projects, making renewable energy more accessible for homeowners, industries, and commercial establishments.
For businesses operating in the renewable energy sector, the revised rates also simplify tax planning and improve the affordability of solar projects.
Conclusion
The latest GST revision has significantly reduced the tax burden on renewable energy devices by bringing the GST rate down to 5% for notified products such as solar panels, solar cells, wind energy equipment, biogas plants, and other renewable energy devices. However, businesses should remember that certain standalone components, including batteries, cables, and mounting structures, may still attract 18% GST depending on their classification.
Before raising invoices or claiming Input Tax Credit, taxpayers should verify the correct classification of goods and refer to the latest GST notifications to ensure complete compliance with the law.
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Vansh Bhatiya is an Accounts Executive in TAXAJ's Accounts & Taxation team. With over six years of industry experience, Vansh handles bookkeeping, tax filings and day-to-day compliance for clients. TAXAJ is a multi-disciplinary consulting firm spanning finance, taxation, legal, secretarial, FEMA and IPR, with offices in Delhi, Bihar, Bangalore and Goa.
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