India cuts GST on solar cells and modules to lower costs
Image: Adani Solar
From pv magazine India
India's GST Council has reduced the GST rate on solar cells – whether or not assembled into modules – from 12% to 5%, effective Sept. 22.
The tax cut is expected to make solar cells and modules more affordable, driving greater adoption of solar power systems among residential, commercial, and industrial consumers. As costs fall, the move is likely to accelerate the transition toward renewable energy.
The GST Council also cut the tax rate to 5% for other renewable energy devices and parts used in their manufacture. These include solar power-based devices and generators, solar cookers, solar lanterns or solar lamps, windmills, wind-operated electricity generators, waste-to-energy plants and devices, biogas plants, and ocean wave or tidal energy devices and plants.
Girishkumar Kadam, senior vice president and group head at ICRA Ltd., said the rationalization of GST rates for solar modules and wind turbine generators will reduce capital costs for solar and wind power projects by about 5%. He added that this is expected to reduce the cost of generation for solar power projects.
“[The move] would reduce the capital cost for under-implementation projects and also likely to reflect in upcoming bids,” said Kadam. “This in turn will benefit the power distribution companies in the form of lower power purchase cost, going forward.”
Amit Paithankar, CEO and whole-time director of Waaree Energies Ltd, said the GST rationalization reflects the government’s commitment to India’s clean energy transition. He said the uniform 5% rate will lower project costs and accelerate the capacity additions needed to meet India’s clean energy targets, while sending a strong signal to investors and improving the financial viability of the renewable energy sector.
“This development will directly help reduce the overall cost of solar modules. While the exact reduction will depend on project specifications and configurations, customers can expect a tangible decrease in module prices, further strengthening the case for solar adoption,” added Paithankar. “The move will also help expand solar adoption in households across the country, supporting the implementation of the PM Surya Ghar Yojana.”
He noted that while the new rate may temporarily increase inverted taxation, the government’s focus on faster Input Tax Credit (ITC) refunds will help address this. “Overall, these GST reforms will reduce the cost of green power for consumers, strengthen the domestic manufacturing value chain, create jobs, and promote energy independence,” Paithankar said.