GST rate rationalisation: A big boost for green energy

The rationalisation of GST in the solar, wind, and battery sectors is expected to reduce the capital cost for solar and wind power projects by 5% while the price of all batteries brought to a uniform 18% GST bracket will make clean energy and storage solutions more affordable and accessible for households and businesses.

The GST Council on Wednesday decided to reduce taxes to 5% from the existing 12% on silicon wafers, solar power-based devices, windmills, and wind-operated electricity generators and photovoltaic cells.

“The rationalisation of GST rates for solar PV modules and wind turbine generators is expected to reduce the capital cost for solar and wind power projects by 5%. This is expected to reduce the cost of generation for solar power projects by 10 paise per unit and for wind power projects by 15-17 paise per unit,” said Girishkumar Kadam, Senior Vice President & Group Head, ICRA Ltd.

He said this would reduce the capital cost for under-implementation projects and would also likely be reflected in upcoming bids. This, in turn, will benefit the power distribution companies in the form of lower power purchase costs going forward. 

The India Energy Storage Alliance (IESA), an industry alliance focused on the development of advanced energy storage, green hydrogen, and e-mobility, said they are delighted that all batteries, whether lithium-ion or otherwise, have been brought to the 18% GST bracket.

“We at IESA had been advocating the same for long, this will give impetus to non-lithium technologies (erstwhile 28% GST) to get a level playing field. On the other hand, for the Clean Hydrogen ecosystem, Ammonia GST has been reduced from 18% to 5% and Hydrogen fuel cell vehicles not longer than 4m GST from 12% to 5%,” Debmalya Sen, President, IESA, told Business Today.

Calling it a powerful move, Preeti Bajaj, MD & CEO, Luminous Power Technologies, said this will not only boost demand and accelerate the adoption of solar energy but also strengthen grid stability and long-duration storage for renewable power.

“We welcome this landmark reform, which aligns with our vision of fulfilling every Indian consumer’s evolving energy needs with smart, sustainable, and accessible energy solutions.  These measures will also stimulate growth across allied renewable energy industries by job creation, thereby laying a strong foundation for a future-ready India,” she said.