What is GST on solar
GST (Goods and Services Tax) on solar in India is the consumption tax applied to solar PV equipment, installation services and related goods and services. The GST Council’s 56th meeting (3 September 2025) cut GST on renewable energy devices, solar panels and complete solar power generating systems from 12% to 5%. CBIC notified the change in Notification 9/2025-Integrated Tax (Rate) on 17 September 2025, and it took effect on 22 September 2025. Current rates are:
- Solar PV modules and cells: 5%
- Complete solar power generating system, goods portion: 5%
- Installation, engineering and commissioning services: 18%
- Solar inverters: 5% or 18% depending on classification (heading 8504 sits at 18%, so confirm the entry the supplier relies on)
- Mounting structures and civil works: usually 18%
- Battery storage equipment: 18%
- Electricity supply: Exempt
Solar equipment was taxed at 5% when GST began in July 2017, then at 12% from 1 October 2021 until 21 September 2025. Many older articles and quotes still show the 12% figure. On a composite supply of equipment plus installation, the 70:30 rule values 70% of the contract as goods at 5% and 30% as services at 18%, which is about 8.9% in total (it was about 13.8% at the earlier 12% goods rate). Business customers can claim input tax credit (ITC) to offset their own GST obligations, while residential customers (including PM Surya Ghar beneficiaries) cannot. The full rate breakdown by component is worked through in our GST on solar inverters and panels guide.
Why GST on solar matters
Project cost. Adds roughly 9 percent to a composite project’s capex under the 70:30 rule.
ITC for business. Recoverable for taxpaying corporates, alongside accelerated depreciation benefits.
PM Surya Ghar impact. Residential customers absorb full GST, which is why our PM Surya Ghar subsidy calculator walks through net cost after both GST and subsidy.
Cash flow. GST timing affects working capital.
PPA economics. GST affects developer cost structure.
GST rate structure
| Item | Rate |
|---|---|
| Solar PV modules and cells | 5% |
| Complete solar power generating system (goods portion) | 5% |
| Solar inverters (HSN 8504) | 5% or 18%, depending on classification |
| Other solar power based devices listed in entry 437 | 5% |
| Mounting structures | Usually 18% |
| Battery storage equipment | 18% |
| Installation services | 18% |
| Civil works for solar | 18% |
| Composite supply (equipment plus installation) | 70% at 5% and 30% at 18%, about 8.9% in total |
| Electricity supply | Exempt |
Technical deep dive
Impact on residential PM Surya Ghar
Impact on C&I solar
Historical timeline
| Period | Solar equipment GST |
|---|---|
| Pre-July 2017 | Pre-GST (various VAT) |
| July 2017 | 5% |
| 1 October 2021 | Increased to 12% |
| 22 September 2025 | Reduced to 5% (Notification 9/2025-Integrated Tax (Rate)) |
| Current | 5% on solar power generating systems and panels |
ITC mechanism
Business customer:
- Pays GST on the solar equipment purchase at the rate its classification carries
- Collects 18% GST on power sales (if applicable) or other output
- Claims ITC on solar GST against output GST
- Net cash outflow = output GST, input GST credit
Real-world applications
Project cost budgeting.
Tax structure decisions (CAPEX vs RESCO).
Financial modelling, typically run through solar financial modeling software rather than manual spreadsheets.
Tender bid pricing for EPCs quoting customers.
Working capital management.
Best practices
Document GST invoices for ITC claim.
Plan capex timing to align with tax periods.
Verify HSN classification for equipment.
Consult tax advisor for complex structures.
Account for GST in project cash flow models.
Ask the supplier which notification entry each invoice line relies on.
Indian market context
The GST Council reviews rates periodically, so confirm the rate in force on the invoice date.
The September 2025 reduction applies to supplies from 22 September 2025; invoices for earlier supplies can still show 12 percent.
Some states provide GST refund on renewable equipment.
PLI scheme partially offsets GST through manufacturing incentive.
ALMM-listed modules are treated under the same GST rates as other solar equipment.
Standards and certifications
| Standard | Scope |
|---|---|
| Central Goods and Services Tax Act 2017 | Statutory basis |
| GST Council notifications | Rate determination |
| HSN classification | Goods identification |
| GSTN | Tax administration |
Key takeaways
GST on Indian solar: 5 percent on panels and complete solar power generating systems from 22 September 2025, 18 percent on installation services, about 8.9 percent overall on a composite supply under the 70:30 rule. Business customers recover through ITC; residential absorbs full GST. PM Surya Ghar customers see GST on top of subsidised equipment. Project cost models must include GST and ITC treatment, and must state which notification entry each line relies on.
Further reading
For how GST on Solar plays out in real projects, these guides go deeper:
- GST on Solar Inverters and Panels 2026
- Most Reliable Solar Inverter in India (2026)
- Solar Inverter ka Rate 2026: Sabhi Sizes ka Price Table
- Solar Inverter Failure: 20 Questions Answered
Sources
- PIB, Government of India: release on GST rate changes for renewable energy devices (17 September 2025)
- GST Council, 56th meeting FAQs (September 2025)
- CBIC Notification 9/2025-Integrated Tax (Rate), 17 September 2025, with the Central Tax (Rate) counterpart.
- Central Goods and Services Tax Act 2017.
- HSN classification for solar equipment.
Frequently Asked Questions
What is GST on solar in simple words?
What is the GST rate on solar modules?
What is GST on solar inverters?
What is GST on services?
Can I claim input tax credit?
Has GST on solar changed?
Is GST applicable on PM Surya Ghar?
Does GST add to project cost?
What is the GST rate breakdown?
Is GST on solar same across states?
What is the impact on residential payback?
Can ITC be claimed retrospectively?
Does GST apply to imports?
What is the GST on solar power sales?
Is GST on solar disputed?
From the Blog
CFO overseeing solar financing, procurement, and channel partner enablement at Qbits.