New Delhi, Sep 18: The Ministry of New and Renewable Energy on Wednesday announced that the reduction of Goods and Services Tax (GST) on renewable energy equipment from 12% to 5% effective from September 22 will make electricity more affordable while giving a major push to India’s green energy goals.
The ministry said the move will reduce the capital cost of clean energy projects, benefiting households, farmers, industries, and developers alike. For instance, the cost of a utility-scale solar project, typically around ₹3.5–4 crore per MW, will now see savings of ₹20–25 lakh per MW. At the scale of a 500 MW solar park, this translates to project cost reductions of more than ₹100 crore, making tariffs more competitive.
Lower GST is also expected to ease the financial burden on distribution companies (DISCOMs), bringing down nationwide power procurement costs by ₹2,000–3,000 crore annually.
For households, rooftop solar systems will become more affordable, with a typical 3 kW system now cheaper by ₹9,000–10,500, accelerating adoption under the PM Surya Ghar: Muft Bijli Yojana. Farmers under the PM-KUSUM scheme will also see major benefits, as a 5 HP solar pump priced at around ₹2.5 lakh will now cost ₹17,500 less. At the scale of 10 lakh solar pumps, farmers collectively stand to save ₹1,750 crore, making irrigation more affordable and sustainable.
The ministry further highlighted that reduced GST will enhance competitiveness of Indian-made solar modules and components by 3–4%, supporting Make in India and Aatmanirbhar Bharat. With India targeting 100 GW of solar manufacturing by 2030, the reform is expected to attract significant fresh investment.
India aims to add around 300 GW of renewable capacity by 2030. Even a modest 2–3% cost reduction could unlock ₹1–1.5 lakh crore in investment potential. Each GW of solar avoids 1.3 million tonnes of CO2 annually; faster deployment enabled by GST rationalisation could therefore cut an additional 50–70 million tonnes of emissions per year by 2030.