India’s solar industry is on the brink of a significant boost, thanks to the upcoming GST reform that aims to simplify tax rates and reduce costs for renewable energy projects. With the GST Council set to meet in early September 2025 and full implementation expected by Diwali 2025, here’s what this means for solar modules and solar developers across the country.
The Current GST Structure on Solar Products
At present, the taxation system for solar installations in India is far from straightforward:
- Solar modules (panels) are taxed at 12% GST.
- EPC contracts (complete solar system supply and installation) attract a blended rate of around 13.8%, with 70% of the value taxed at 12% (goods) and 30% at 18% (services).
- Mounting structures and accessories fall under 18% GST.
- Batteries, essential for solar storage, face the highest rate—28% GST.
This multi-slab structure has often been criticized for inflating project costs and creating cash flow challenges for developers.
What the New Reform Proposes
The government’s next-generation GST reform is set to overhaul this system by:
- Eliminating the 12% and 28% slabs.
- Introducing just two primary rates—5% and 18%—plus a 40% rate for luxury/sin goods.
For the solar industry, this could translate into:
- Solar modules dropping from 12% to 5% GST.
- EPC projects moving to a simplified 5% rate.
- Batteries reduced from 28% to 18%, significantly lowering storage costs.
- Mounting structures and accessories likely to remain at 18%.
Impact on the Solar Market
If implemented as proposed, these reforms could have far-reaching effects:
- Cost Reduction: Lower GST rates will directly cut the capital cost of solar projects, making solar power more affordable for households, businesses, and utilities.
- Boost to Investments: Simplified taxation reduces compliance complexity, encouraging more investors to enter the sector.
- Acceleration of Renewable Targets: Cheaper solar solutions align with India’s ambition to reach 500 GW of non-fossil energy by 2030.
- Better Adoption of Storage Solutions: Reduced GST on batteries could finally make solar-plus-storage systems financially viable at scale.
The Road Ahead
The final decision will rest with the GST Council, which meets on September 3, 2025. If the reform is approved, Diwali 2025 could mark a new dawn for solar energy in India—one where lower taxes fuel higher adoption and a cleaner, greener energy future.
For now, stakeholders across the industry—manufacturers, EPC contractors, and investors—are eagerly awaiting the outcome.
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