Renewable Energy GST Rationalised To 5%, Projects To Get Cheaper

The rationalization of GST rates across the renewable energy value chain from 12 per cent to 5 per cent will bring down the cost of clean energy projects, making electricity more affordable and directly benefiting households, farmers, industries, and developers. As per a release by the Ministry of New and Renewable Energy, the capital cost of a utility-scale solar project, which typically amounts to around Rs. 3.5-4 crore per MW, will now see savings of Rs. 20-25 lakh per MW. At the scale of a 500 MW solar park, this translates into project cost reductions of over Rs. 100 crore, significantly improving tariff competitiveness.

The reduction in GST is expected to lower levelised renewable tariffs, easing the financial burden of electricity procurement for distribution companies (DISCOMs). This could translate into nationwide annual savings of Rs. 2,000-3,000 crore in power procurement costs.

"The reform will make rooftop solar systems more affordable for households. A typical 3 kW rooftop system will now be cheaper by about Rs. 9,000-10,500, making it easier for lakhs of families to adopt solar energy and accelerating large-scale uptake under the PM Surya Ghar: Muft Bijli Yojana," the release said.

Farmers under the PM-KUSUM scheme are also expected to benefit significantly. A 5 HP solar pump, costing about Rs. 2.5 lakh will now be cheaper by nearly Rs. 17,500. At the scale of 10 lakh solar pumps, farmers collectively stand to save Rs. 1,750 crore, making irrigation more affordable and sustainable.

The release anticipates that a lower GST will enhance the competitiveness of Indian-made renewable energy equipment by reducing module and component costs by 3-4 per cent, thereby supporting the Make in India and Aatmanirbhar Bharat initiatives.

Given that India plans to add around 300 GW of renewable energy capacity by 2030, even a modest 2-3 per cent cost reduction can free up Rs. 1-1.5 lakh crore in investment capacity. Considering that every GW of manufacturing creates about 5,000 jobs, the reform could support 5-7 lakh direct and indirect jobs over the next decade, strengthening India's clean energy industrial ecosystem.

Each GW of solar saves about 1.3 million tonnes of CO2 annually; faster deployment enabled by GST rationalisation could therefore avoid an additional 50-70 million tonnes of CO2 emissions per year by 2030.

"By making renewable energy more affordable and accessible, this reform aligns with India's international commitments under the Paris Agreement while advancing the nation's target of 500 GW of non-fossil fuel capacity by 2030," the report said.

The revised GST rates will come into effect from 22nd September 2025. This decision is touted to directly benefit millions of consumers, farmers, developers, and manufacturers, while contributing to the twin goals of green growth and energy independence.

(Except for the headline, this story has not been edited by Asianet Newsable English staff and is published from a syndicated feed)

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