In a landmark reform aimed at accelerating India’s shift to clean energy, the GST Council at its 56th meeting on 3 September 2025 approved the reduction of GST on renewable energy devices from 12% to 5%. This decision, aligned with Prime Minister Narendra Modi’s vision of making GST a truly “Good and Simple Tax,” is expected to lower the cost of renewable projects, boost domestic manufacturing, and make clean power more affordable for households, farmers, and industries.

The rationalised GST rates will significantly cut project costs. For example, a utility-scale solar project costing around ?3.5–4 crore per MW will now save approximately ?20–25 lakh per MW, translating to over ?100 crore in savings for a 500 MW solar park. This reduction is likely to make renewable tariffs more competitive, ease the financial burden on distribution companies, and enable nationwide annual savings of up to ?3,000 crore in power procurement costs.

Households will benefit from cheaper rooftop solar systems, with a typical 3 kW system becoming ?9,000–10,500 less expensive, spurring adoption under the PM Surya Ghar: Muft Bijli Yojana. Farmers under the PM-KUSUM scheme will also gain, with the cost of a 5 HP solar pump reduced by nearly ?17,500—saving an estimated ?1,750 crore across 10 lakh pumps. Rural and underserved areas will see more affordable decentralized energy solutions such as mini-grids, solar pumps, and livelihood applications, shortening payback periods and improving returns for schools, health centres, and small businesses.

Lower GST will also strengthen the competitiveness of Indian-made renewable equipment, cutting module and component costs by 3–4% and bolstering the Make in India and Aatmanirbhar Bharat initiatives. With India targeting 100 GW of solar manufacturing capacity by 2030, the reform is expected to draw fresh investment into manufacturing hubs and create an estimated 5–7 lakh direct and indirect jobs over the next decade.

Beyond reducing the levelised cost of energy, the tax cut is likely to boost investor confidence, accelerate power purchase agreements, and speed up project commissioning. Given India’s plan to add 300 GW of renewable capacity by 2030, even a modest cost reduction could free up ?1–1.5 lakh crore in investment capacity. Faster deployment enabled by GST rationalisation could also help avoid an additional 50–70 million tonnes of CO2 emissions annually by 2030.

This decision aligns with India’s international commitments under the Paris Agreement and supports the nation’s goal of achieving 500 GW of non-fossil fuel capacity by 2030. By making renewable energy more affordable and accessible, the revised GST rates—effective 22 September 2025—will directly benefit millions of consumers, farmers, developers, and manufacturers, while contributing to green growth, energy independence, and India’s journey towards becoming a developed nation.