New GST on Solar Panel: A Complete Guide for 2025

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. On 22 September 2025, the Government of India introduced a new GST structure with the aim of simplifying slabs and reducing the tax burden on renewable energy products. Understanding how New 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 – 21st Sep 2025: Solar power generating systems are taxed under a "composite supply rule," where 70% of the system cost is taxed at 12% GST (for panels), while 30% is taxed at 12% GST (for inverters and other parts).
• GST Structure From 22 Sep 2025 : The GST rate on solar power generating systems has been reduced from 12% to 5%, aligning with broader reforms aimed at promoting clean energy adoption and reducing the cost of renewable energy projects. This reduction applies to both goods and services components of solar installations, including panels, inverters, batteries, and associated accessories.

Current GST Rate on Solar Panels (2025)

As of 22 September 2025, the GST on solar panels in India is:

Why This Change Matters for Solar

1. Lower Capital Costs: With modules, inverters, and mounting structures moved to 5% GST, the overall cost of installing a rooftop or utility-scale solar project will fall by 8–10%.

2. Boost for Residential Solar: Households looking to adopt solar for home under the solar rooftop yojana will benefit the most. Lower GST makes small rooftop systems more affordable.

3. Support for EPC Companies: Engineering, Procurement, and Construction (EPC) players often struggled with mixed GST rates on components and services. The simplified 5% slab reduces compliance issues and helps with smoother billing.

4. Challenges for Solar Batteries: Batteries remain outside the 5% slab in most cases, attracting 18%. This may slow down hybrid and off-grid solar adoption where storage is essential. Industry bodies are already demanding GST relief for batteries to promote energy storage.

5. Encouragement for Government Schemes: Lower system prices align with the government’s mission to expand rooftop solar installations under schemes like:

• • PM Surya Ghar Muft Bijli Yojana (offering free solar for households with subsidies)
  • KUSUM Solar Pump Yojana (for farmers)
  • State-level solar subsidy programs

Impact of GST on Solar Panel Prices

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

• For Homeowners: Solar panel system prices will reduce, leading to faster ROI (Return on Investment). This is especially important in states with strong solar adoption like Gujarat, Rajasthan, Kerala, and Uttar Pradesh.

• For Businesses: Commercial and industrial rooftops will become more attractive as lower GST reduces upfront project costs.

• For Manufacturers: Indian solar panel manufacturers will see higher demand, as the reduced GST improves competitiveness against imported modules.

• For the Environment: Affordable solar means faster adoption, contributing to India’s renewable energy targets and reducing carbon emissions.

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.

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.