GST on Renewable Energy Devices Rationalised to 5% to Accelerate India’s
Clean Energy Transition
·
Rooftop Solar under
PM Surya Ghar: Muft Bijli Yojana to Become Cheaper by
₹9,000–10,500 per 3 kW System
·
Farmers under PM-KUSUM
to Save ₹1,750 Crore on 10 Lakh Solar Pumps with GST Cut
·
Lower GST to Cut
Module and Component Costs by 3–4%, Boosting RE Equipment Manufacturing
·
GST Reform to Power
5–7 Lakh Green Jobs in Renewable Energy Sector over the Next Decade
Major GST Reform to Power
Renewable Energy Growth in India
In line with the vision of Hon’ble Prime Minister Shri
Narendra Modi to make GST a truly “Good and Simple Tax” that
strengthens every sector of the economy, the renewable energy sector has
received a major boost under the latest GST reforms approved by the 56th GST
Council meeting on 3rd September 2025.
Effective 22nd September 2025, the GST
rate across the renewable energy value chain has been rationalized from 12% to
5%, lowering project costs, boosting domestic manufacturing, and making
clean energy more affordable for households, farmers, industries, and
developers.
Lower Costs and Greater
Competitiveness
·
Capital costs of utility-scale solar projects will
fall by ₹20–25 lakh per MW. For a 500 MW solar park, this
translates into savings of over ₹100 crore, improving tariff
competitiveness.
·
Distribution companies (DISCOMs) could collectively
save ₹2,000–3,000 crore annually on power procurement, easing
financial stress and ensuring cheaper electricity for consumers.
Benefits
to Households, Farmers, and Rural Communities
·
A 3 kW rooftop
solar system will now cost ₹9,000–10,500 less, accelerating
adoption under the PM Surya Ghar: Muft Bijli Yojana.
·
Farmers under the PM-KUSUM scheme will benefit from 5 HP solar pumps being ₹17,500
cheaper, saving nearly ₹1,750 crore at the scale of 10 lakh
pumps.
·
Rural communities will gain from more affordable
mini-grids, livelihood solutions, and solar water pumps, empowering schools,
health centres, and small businesses with clean energy.
Boost to
Domestic Manufacturing and Jobs
·
Lower GST will reduce module and component costs
by 3–4%, enhancing competitiveness of Made in India products and
supporting the Aatmanirbhar Bharat mission.
·
With India targeting 100 GW of solar
manufacturing capacity by 2030, the reform will encourage investment in
domestic hubs. Each GW of capacity generates about 5,000 jobs, meaning 5–7
lakh direct and indirect jobs could be created over the next decade.
Accelerating
India’s Energy Transition
·
The GST cut will lower the levelized cost of
renewable energy, improving investor confidence and accelerating project
commissioning.
·
With plans to add 300 GW of renewables by 2030,
even a 2–3% cost reduction can unlock ₹1–1.5 lakh crore in
additional investments.
·
Faster deployment could avoid 50–70 million
tonnes of CO₂
emissions annually by 2030, reinforcing India’s global leadership in climate
action.
This landmark GST reform directly
benefits millions of consumers, farmers, developers, and manufacturers, while
advancing India’s twin goals of green growth and energy independence. It
reaffirms the Government’s commitment to making clean, affordable, and
sustainable energy the foundation of India’s journey towards Viksit Bharat
and achieving 500 GW of non-fossil fuel capacity by 2030.
In line with the
vision of Hon’ble Prime Minister Narendra Modi to make GST a truly “Good and Simple
Tax” that strengthens every sector of the economy, the renewable energy sector has
received a major impetus under the latest GST reforms approved by the GST Council
in its 56th meeting held on 3rd September 2025.
The rationalization
of GST rates across the renewable energy value chain from 12% to 5% will bring down
the cost of clean energy projects, making electricity more affordable and directly
benefiting households, farmers, industries, and developers. For instance, the capital
cost of a utility-scale solar project, which typically amounts to around ₹3.5–4
crore per MW, will now see savings of ₹20–25 lakh per MW. At the scale of
a 500 MW solar park, this translates into project cost reductions of over ₹100
crore, significantly improving tariff competitiveness.
Lower Costs and
Greater Competitiveness
The reduction in
GST is expected to lower levelised renewable tariffs easing
the financial burden of electricity procurement for distribution companies (DISCOMs).
This could translate into nationwide annual savings of ₹2,000–3,000 crore
in power procurement costs. End consumers will benefit from greater access to affordable
clean electricity, reinforcing the long-term sustainability of India’s power sector.
Benefits to Households,
Farmers, and Rural Communities
The reform will
make rooftop solar systems more affordable for households. A typical 3 kW rooftop
system will now be cheaper by about ₹9,000–10,500, making it easier for lakhs
of families to adopt solar energy and accelerating large-scale uptake under the
PM Surya Ghar: Muft Bijli Yojana.
Farmers under the
PM-KUSUM scheme will also benefit significantly. A 5 HP solar pump, costing about ₹2.5 lakh,
will now be cheaper by nearly ₹17,500. At the scale of 10 lakh solar pumps,
farmers collectively stand to save ₹1,750 crore, making irrigation more affordable
and sustainable.
Rural and underserved
regions will also gain from cheaper decentralized solutions such as mini-grids,
livelihood applications, and solar water pumps. The shorter payback periods and
improved returns will empower schools, health centres, and small businesses with
clean and reliable energy access.
Boost to Domestic
Manufacturing and Self-Reliance
Lower GST will
enhance the competitiveness of Indian-made renewable energy equipment by reducing
module and component costs by 3–4%, supporting the Make in India and Aatmanirbhar Bharat initiatives. With India targeting 100 GW
of solar manufacturing capacity by 2030, the reform will encourage fresh investment
into domestic manufacturing hubs. Considering that every GW of manufacturing creates
about 5,000 jobs, the reform could support 5–7 lakh direct and indirect jobs over
the next decade, strengthening India’s clean energy industrial ecosystem.
Accelerating India’s Energy Transition
The GST cut will
not only reduce the levelized cost of energy but also boost investor confidence,
enabling faster signing of power purchase agreements and quicker project commissioning.
Given that India plans to add around 300 GW of renewable energy capacity by 2030,
even a modest 2–3% cost reduction can free up ₹1–1.5 lakh crore in investment
capacity. Each GW of solar saves about 1.3 million tonnes of CO₂ annually; faster deployment enabled by GST rationalisation
could therefore avoid an additional 50–70 million tonnes of CO₂ emissions per year by 2030.
By making renewable
energy more affordable and accessible, this reform aligns with India’s international
commitments under the Paris Agreement while advancing the nation’s target of 500
GW of non-fossil fuel capacity by 2030. It firmly positions India as a leader in
the global fight against climate change.
The revised GST
rates will come into effect from 22nd September 2025. This landmark decision will
directly benefit millions of consumers, farmers, developers, and manufacturers,
while contributing to the twin goals of green growth and energy independence. It
underscores the Government’s commitment to ensuring that clean, affordable, and
sustainable energy becomes the foundation of India’s journey towards Viksit Bharat.