Clean Energy Projects Installations to Get Cheaper Due to Lower Tax on Devices

Clean energy projects installations are likely to get cheaper as the GST rate on renewable energy devices and parts has been slashed from 12% to 5% to promote adoption of green power.

At its 56th meeting on Wednesday, the GST Council also recommended the duty to be reduced from 12% to 5% on fuel cell motor vehicles including hydrogen vehicles based on fuel cell technology, besides solar cookers and solar water heater and systems.

The objective to reduce GST on such products is to promote renewable energy goods, as per the Frequently Asked Questions (FAQs) issued by the Ministry of Finance.

The new Goods and Services Tax (GST) rate will be effective from September 22.

As part of the rate rationalisation exercise, the Centre and states consented to reduce GST from 12% to 5% on photo voltaic cells (whether or not assembled in modules or made up into panels), solar power-based devices, solar power generator, wind mills, and wind operated electricity generator (WOEG).

Besides, duty has been reduced on bio-gas plant, waste to energy plants/devices, solar lantern/solar lamp, ocean waves/tidal waves energy devices/plants.

The government said that these goods already faced inverted duty structure. While reducing the GST rate to 5% will deepen inversion, mechanism for refund arising out of inverted duty structure is available.

Commenting on the development, Rohit Chandra, Co-Founder, & CEO, OMC Power, said: "The reform paves the way for inclusive growth, rural empowerment, and sustainable energy solutions that will strengthen India's economic and social fabric." Amit Paithankar, CEO & Whole-time Director, Waaree Energies Limited, said: "The reduction of GST on renewable energy devices and equipment will lower project costs and accelerate the capacity addition needed to meet India's clean energy targets." Ratul Puri, Chairman, Hindustan Power, said: "We believe this step will not only ease operations across the value chain but also strengthen India's transition towards sustainable energy." Vinay Rustagi, Chief Business Officer, Premier Energies, said that lower costs for consumers are expected to boost demand, drive India's renewable energy transition, and contribute to achieving the target of 500 GW non-fossil fuel based capacity by 2030.

The step sends a strong signal to investors. It will improve the financial viability and attract investments into the renewable energy sector, said Ishver Dholakiya, Founder, Goldi Solar.

Amit Rautela, CFO of Meja Urja Nigam, said "GST hike on coal from 5% to 18% may not have significant impact on thermal generators as earlier 5% GST plus ₹400/tonne compensation cess has now been merged into GST. This seems to be an structural adjustment with no additional burden." According to Akshay Hiranandani, CEO, Serentica Renewables, lower capital costs will translate into more competitive tariffs in auctions, supporting quicker capacity addition and passing direct benefits to consumers.

The GST reform 2.0 will substantially cut project costs, making installations more viable and attractive for developers and consumers. By easing the financial burden on capital-intensive projects, GST rationalisation will improve returns, encourage private participation, and accelerate nationwide adoption, Simarpreet Singh, Executive Director and CEO, Hartek Group.

Srivatsan Iyer, Global CEO of Hero Future Energies, said "This reform enhances the sector's competitiveness and reflects India's steadfast commitment to its 2030 renewable energy targets and 2070 net-zero vision. More affordable clean technologies will accelerate adoption, strengthen energy independence, and create green jobs-bringing the nation closer to a sustainable future."