GST on Solar Panel: A Complete Guide for 2025

The renewable energy sector in India has seen remarkable growth in the last decade, with solar energy leading the transformation. Solar panels have become a popular choice for homeowners, businesses, and industries aiming to reduce electricity costs and support a sustainable future. However, one of the most discussed aspects of solar adoption in India is taxation, particularly the Goods and Services Tax (GST) on solar panels. Understanding how GST impacts solar panel prices is crucial for consumers and businesses alike.

In this article, we will break down the concept of GST on solar panels, its evolution, current tax rates, and how it affects the overall affordability of solar energy.

What is GST on Solar Panels?

The Goods and Services Tax (GST) is a unified indirect tax system introduced in India in 2017. It replaced multiple state and central taxes with a single tax structure, making transactions more transparent. Solar panels, like any other commodity, fall under the GST framework.

When you purchase a solar panel or a complete solar system, GST is levied on different components such as:

• Solar PV modules (panels)
• Inverters
• Batteries (if included in hybrid/solar storage systems)
• Mounting structures
• Cables and balance of system components

The applicable GST percentage varies depending on the component.

Evolution of GST on Solar Panels

Since its introduction, GST on solar panels has undergone several changes:

• 2017 (Launch of GST): Solar PV modules were taxed at 5%. Other system components such as inverters and batteries were taxed at 18%.
• 2018 – 2020: Clarifications were issued by the GST Council regarding bundled supplies (when solar systems are sold as a package).
• 2021 – Present: Solar power generating systems are taxed under a "composite supply rule," where 70% of the system cost is taxed at 5% GST (for panels), while 30% is taxed at 18% GST (for inverters and other parts).

This structure reduced confusion but still led to debates on cost burden for end consumers.

Current GST Rate on Solar Panels (2025)

As of 2025, the GST on solar panels in India is:

• Solar PV modules (panels): 5% GST
• Inverters, batteries, and other equipment: 18% GST
• Composite system (rooftop/utility projects): 70% of project value taxed at 5% and 30% taxed at 18%

This means that if a customer buys a rooftop solar system worth ₹1,00,000, the effective GST is calculated partly at 5% and partly at 18%, leading to an approximate effective rate of around 8.9%.

Impact of GST on Solar Panel Prices

GST directly influences the affordability of solar systems. Here’s how:

1. For Homeowners

• • A rooftop solar system for a home typically costs between ₹60,000 to ₹1,20,000 per kW.

1. • Due to GST, the cost increases by 8–10%.

   • While this slightly raises the upfront investment, homeowners still recover costs within 4–5 years through savings on electricity bills.
     
     

2. For Businesses and Industries

   • Large-scale projects involving MW-scale solar plants have higher capital costs.

   • GST increases overall project costs but is partly offset by the Input Tax Credit (ITC) available to businesses.
     
     

3. For Solar Manufacturers

   • GST on raw materials affects the pricing structure of solar panel manufacturers in India.

   • However, clarity in GST has streamlined taxation and encouraged more organized growth.

Government Perspective on GST in Solar

The government views GST on solar as a necessary step to:

• Standardize taxation across states.
• Increase revenue collection for public infrastructure.
• Bring transparency in the renewable energy supply chain.

At the same time, the government has launched multiple subsidy schemes such as the PM Surya Ghar Muft Bijli Yojana and Solar Rooftop Yojana to offset the burden of GST and make solar adoption easier for households.

Benefits Despite GST

Even with GST, solar energy remains one of the most cost-effective and environment-friendly solutions. Some benefits include:

• Lower electricity bills – Savings of up to 80% on power costs.
• Government subsidies – Reducing upfront costs by 20–40% for residential users.
• Eco-friendly energy – Reduced carbon footprint and pollution.
• Long-term investment – Solar panels last 25+ years, making them highly economical.

Will GST on Solar Panels Reduce in the Future?

There are ongoing discussions within the renewable energy sector to reduce GST rates further, especially on solar inverters and batteries. Industry experts believe lowering GST will accelerate solar adoption, particularly in rural and residential segments. While no official announcement has been made yet, the government is expected to review the taxation policy as India aims to meet its ambitious renewable energy targets for 2030.

Conclusion

The GST on solar panels may have increased upfront costs slightly, but it has not slowed down India’s solar revolution. With subsidies, falling solar PV module prices, and government-backed schemes, solar remains a highly attractive investment for households, businesses, and industries.

Understanding GST on solar panels helps consumers make informed decisions and plan their investments wisely. As India moves towards becoming a global leader in renewable energy, taxation policies like GST will continue to evolve to balance affordability with economic growth.