GST Cut on Solar Components: What It Means for Kerala and India’s Renewable Energy Future

GST Cut on Solar Components:

The Goods and Services Tax (GST) Council has announced a major relief for renewable energy by reducing the GST on renewable energy equipment from 12% to 5%. This includes solar modules, solar cells, solar cookers, biogas plants, windmills, waste-to-energy devices, hydrogen fuel-cell vehicles, and more. The move is expected to lower equipment costs by nearly 7%, reducing the cost of installing rooftop solar plants by ₹3,000–₹4,000 per kilowatt. However, GST on installation services will remain unchanged at 18%.

Boost for Renewable Energy

The revised 5% GST rate is a significant step toward promoting solar energy in Kerala and across India. With India’s domestic solar module capacity reaching 100 GW, the government is working to strengthen local manufacturing, though reliance on imports for wafers and ingots remains. The Production-Linked Incentive (PLI) scheme worth ₹19,500 crore has faced delays, but the tax cut is expected to encourage adoption of rooftop solar systems and utility-scale projects.

For households and institutions, the reduced GST will make solar power systems more affordable, enhancing savings on electricity bills and accelerating the shift to clean energy.

Coal vs. Solar Power

While green energy received a boost, the GST Council has increased GST on coal from  5% to 18%. Coal remains India’s largest source of power, and the government plans to add 80 GW of coal-based capacity by 2032. The higher tax on coal, combined with lower rates for renewable energy equipment, could help tilt the balance in favor of cleaner power sources in the long run.

Kerala’s Policy Uncertainty

In Kerala, however, the benefits of the GST cut may be limited. The state’s Electricity Regulatory Commission is drafting new rules that could restrict existing incentives for rooftop solar producers. While the Commission insists that the solar plants will remain profitable, the payback period for investments could be longer. Implementation of the new rules has been delayed due to court interventions, leaving stakeholders in uncertainty.

Key Takeaways of GST rate cuts

• GST on renewable energy components cut to 5%, lowering rooftop solar costs.

• Installation services remain taxed at 18%.

• GST on coal raised to 18%, signaling a push toward cleaner energy.

• India’s solar capacity strengthens, but supply chain dependence on imports persists.

• In Kerala, regulatory uncertainty may delay the full benefits for solar adopters.

At Enlead Energy Solutions solar company, we believe this GST reduction is a step in the right direction for India’s renewable energy future. Despite policy uncertainties, solar power in Kerala remains a smart investment for long-term savings and sustainable living.

For expert consultation on rooftop solar installation and customized solar energy solutions, visit Enlead Energy Solutions.