In line with the vision of Prime Minister Narendra Modi to make GST a truly ‘Good and Simple Tax’ that strengthens every sector of the economy, the renewable energy sector has received a major impetus under the latest GST reforms approved by the GST Council in its 56th meeting held on 3rd September 2025.
The rationalisation of GST rates across the renewable energy value chain from 12% to 5% will bring down the cost of clean energy projects, making electricity more affordable and directly benefiting households, farmers, industries, and developers. For instance, the capital cost of a utility-scale solar project, which typically amounts to 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 into project cost reductions of over `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 `2,000–3,000 crore in power procurement costs.
End consumers will benefit from greater access to affordable clean electricity, reinforcing the long-term sustainability of India’s power sector. The reform will make rooftop solar systems more affordable for households. A typical 3 kW rooftop system will now be cheaper by about `9,000–10,500.
