GST on Solar Panels in India: Latest GST Rates, HSN Codes and Solar Installation Tax Explained
GST on solar equipment causes more confusion than almost any other part of a solar purchase. Homeowners see one rate quoted online and a different one on their invoice. Installers apply different rates to the same job depending on how the contract is structured. And the rules themselves have changed more than once since 2017.
This guide explains the current position in plain terms: what GST rate applies to solar panels and system components, which HSN codes to use, how the composite supply rule works for installation contracts, who can claim input tax credit, and how GST affects the final price you pay.
Key Takeaways
- Following the GST Council revision effective 22 September 2025, notified renewable energy devices including solar panels moved from 12 percent to a concessional 5 percent rate.
- Solar photovoltaic cells and modules fall under HSN 8541, and solar inverters under HSN 8504.
- When components such as batteries, cables and mounting hardware are sold standalone rather than as part of a solar power generating system, they generally attract 18 percent.
- Turnkey installation contracts are treated as composite supply under a 70:30 valuation split, with 70 percent taxed as goods and 30 percent as services.
- Businesses can usually claim input tax credit on solar installations, making GST a recoverable cost. Residential consumers cannot, so GST is a real cost for homeowners.
- The reduction from 12 percent to 5 percent lowered the tax component on a typical rooftop system, which fed through into lower installed prices.
Tax rules change and individual circumstances vary, so treat this as general information rather than tax advice. Confirm the position with a chartered accountant before relying on it for a purchase or a filing.
Is GST Applicable on Solar Panels?
Yes. Solar equipment is not exempt from GST in India. What it receives instead is concessional treatment, meaning a lower rate than the standard slabs that would otherwise apply to electrical goods and construction services.
The policy logic is straightforward. Rooftop and utility scale solar are central to India's renewable energy targets, and a lower tax rate directly reduces project cost and shortens payback. That is why solar has been kept in a concessional band since GST was introduced in 2017.
Current GST Rate on Solar Panels
As things stand, notified renewable energy devices and their parts, which includes solar photovoltaic modules and solar power generating systems, attract 5 percent GST. This followed the GST Council's rate rationalisation exercise with effect from 22 September 2025, which moved these items down from the 12 percent slab.
How the Rate Has Changed Over Time
- 2017 to 2021: solar modules and notified renewable energy devices at 5 percent, with many balance of system components at 18 percent.
- October 2021 onward: solar modules and renewable energy devices increased to 12 percent.
- From 22 September 2025: reduced to 5 percent under the GST Council's revised rate structure.
Because of these changes, older articles and even some vendor material still quote 12 percent or the pre 2021 figures. Always check the date on any source and verify against the current notification.
A rate change does not automatically reduce the price on a quotation you already accepted. GST is applied based on the time of supply, so the rate that applies depends on when the invoice is raised and payment received, not when you first discussed the project. This matters if a contract straddles a rate change.
Solar Panel HSN Codes
HSN codes classify goods for GST purposes. Getting the code right determines the rate, so this is the part installers and dealers most need to get correct on invoices.
Common HSN Codes in Solar
- 8541: photovoltaic cells, whether or not assembled in modules or made up into panels. This is the primary solar panel HSN code.
- 8504: static converters, which covers solar inverters, both string and hybrid types.
- 8507: electric accumulators, which covers batteries including lithium ion and lead acid.
- 8544: insulated wire and cable, covering DC and AC solar cabling.
- 7308 or 7610: structures and parts of structures, covering steel or aluminium mounting systems.
- 8419: solar water heaters and related equipment.
- 9954 and 9987: SAC codes for construction and installation, and for maintenance and repair services respectively.
Why the Same Item Can Carry Two Different Rates
This is the source of most confusion. A component supplied as part of a notified solar power generating system is taxed at the concessional renewable energy rate. The same component sold loose over the counter as ordinary electrical goods is taxed at its own general rate, which for items like batteries, cables and structures is typically 18 percent.
So a battery bundled into a complete solar installation contract and the identical battery bought separately from a dealer can appear on invoices at different rates entirely legitimately. What matters is the nature of the supply, not the item in isolation.
GST on Solar Installation Services: the 70:30 Rule
Most rooftop solar is bought as a turnkey package: the installer supplies the equipment and does the work for one combined price. Under GST this is a composite supply, and there is a specific valuation mechanism for solar.
The rule treats 70 percent of the gross contract value as a supply of goods, taxed at the concessional renewable energy rate, and the remaining 30 percent as a supply of services, taxed at the standard service rate of 18 percent.
Working the Effective Rate
With goods at 5 percent and services at 18 percent, the blended effective rate on a turnkey solar EPC contract works out as follows:
(0.70 multiplied by 5 percent) plus (0.30 multiplied by 18 percent) equals 3.5 percent plus 5.4 percent, giving an effective GST rate of approximately 8.9 percent on the total contract value.
On a Rs. 2,00,000 rooftop system, that is roughly Rs. 17,800 of GST embedded in the price rather than a flat 5 percent on everything.
When the 70:30 Rule Does Not Apply
If you buy the equipment yourself and separately engage a contractor for labour only, the two supplies are taxed independently. The equipment carries its own rate and the labour service carries 18 percent. This split approach sometimes looks cheaper on paper but usually costs more overall, and it complicates warranty accountability if something fails.
For a residential buyer, GST is a genuine cash cost with no route to recovery, since homeowners are not registered under GST and cannot claim input tax credit. For a registered business, the same GST is usually recoverable, which is one reason commercial solar economics look considerably stronger than residential economics on the same system.
Input Tax Credit on Solar Installations
For businesses, the ability to claim input tax credit is often the difference between a good and an excellent return on a solar investment.
Who Can Claim
A GST registered business installing solar for its own commercial or industrial premises can generally claim credit for the GST paid on the system, treating it as plant and machinery used in the course of business. The credit offsets output GST liability, effectively removing the tax from the cost of the asset.
Where It Gets Complicated
Input tax credit rules contain restrictions on goods and services used for construction of immovable property. Whether a rooftop solar plant is treated as plant and machinery, which is eligible, or as part of the building, which is not, has been the subject of interpretation and dispute. The manner in which the contract is drafted and the invoice is raised can affect the outcome.
This is precisely the kind of question that warrants a conversation with your chartered accountant before the contract is signed, not after the invoice is booked.
Who Cannot Claim
Residential consumers, unregistered persons and businesses under the composition scheme cannot claim input tax credit. For these buyers GST is simply part of the purchase price.
GST and the PM Surya Ghar Subsidy
A common question is whether GST is charged on the pre subsidy or post subsidy amount.
The subsidy under PM Surya Ghar is a central financial assistance disbursed to the beneficiary, not a discount granted by the vendor. In practice, the invoice is generally raised on the full contract value with GST applied to it, and the subsidy is credited separately to the homeowner's bank account after installation and inspection.
Treatment can vary depending on how the disbursement is structured, so ask your installer to explain clearly how GST appears on your invoice and confirm the position with a professional if the amounts matter to you.
How GST Affects What You Actually Pay
The move from 12 percent to 5 percent on renewable energy devices reduced the tax component of a rooftop system noticeably. On a turnkey contract, the effective blended rate fell from roughly 13.8 percent to roughly 8.9 percent.
For a Rs. 2,00,000 system, that is a difference of close to Rs. 10,000 in embedded tax. In a market where residential payback periods sit in the range of three to five years, a reduction of that scale shortens payback by a few months and improves the overall return.
Commercial buyers benefit differently. Because they recover GST through input tax credit, the headline rate matters less to them than cash flow timing, and their bigger levers are accelerated depreciation and scale driven cost reduction.
What to Check on Your Solar Invoice
- The supplier's GSTIN, and your GSTIN if you are a registered business claiming credit
- Correct HSN codes against each line item
- Whether the contract is billed as a composite supply with the 70:30 split shown, or as separate goods and services
- The GST amount stated separately rather than buried in a single inclusive figure
- CGST and SGST split for intra state supply, or IGST for inter state supply
- Whether the quoted price was inclusive or exclusive of GST, matched against what the invoice says
- Clear description of what is supplied, since vague descriptions create classification risk
Frequently Asked Questions
What is the GST rate on solar panels in India?
Solar photovoltaic cells and modules, classified under HSN 8541, attract a concessional 5 percent GST following the rate revision effective 22 September 2025. Prior to that they were taxed at 12 percent. Rates are subject to change by the GST Council, so verify the current notification before relying on this.
What is the HSN code for solar panels?
HSN 8541 covers photovoltaic cells, whether or not assembled into modules or panels. Solar inverters fall under HSN 8504, batteries under 8507, cables under 8544 and mounting structures under 7308 or 7610 depending on material.
What is the GST rate on a complete rooftop solar installation?
Turnkey installations are taxed as composite supply, with 70 percent of the contract value treated as goods and 30 percent as services at 18 percent. With goods at the concessional 5 percent rate, the effective blended GST on the contract works out to approximately 8.9 percent.
Is GST charged on solar inverters and batteries?
Yes. When supplied as part of a solar power generating system, they take the concessional renewable energy rate. When sold separately as standalone electrical goods, they generally attract 18 percent. The distinction depends on the nature of the supply, not the product alone.
Can homeowners claim a GST refund on solar installation?
No. Input tax credit is available only to persons registered under GST who use the supply in the course of business. Residential consumers cannot claim credit or a refund, so GST is a final cost embedded in the price they pay.
Can a business claim input tax credit on a rooftop solar plant?
In most cases yes, where the plant is used for business purposes and treated as plant and machinery. There are restrictions relating to immovable property that have led to differing interpretations, so the contract structure and invoicing matter. Consult a chartered accountant before finalising the arrangement.
Is GST applicable on solar water heaters?
Solar water heaters and systems fall within the notified renewable energy device category and are taxed at the concessional rate rather than the standard slab. Ancillary components sold separately may be classified and taxed differently.
Do I pay GST on solar maintenance and AMC services?
Yes. Maintenance and repair services attract GST at the standard service rate of 18 percent under the applicable SAC code, since they are a pure supply of services rather than a supply of renewable energy devices.
Did the GST reduction lower solar prices for consumers?
It reduced the tax component of the price, and in a competitive market much of that fed through into lower quoted prices. Panel prices, inverter prices, structure costs and installation labour also move independently, so the observed change in any given quote reflects several factors, not GST alone.
Planning a Solar Installation and Want a Clear Tax Breakdown?
A transparent quotation should show you exactly what is being supplied, under which HSN codes, and how GST has been computed. If a vendor cannot explain their tax treatment clearly, that usually indicates weakness in their documentation more broadly, which matters later when you file a warranty claim or a subsidy application.
FGE Solar provides itemised, GST compliant quotations for residential and commercial solar across Kerala, with clear documentation for subsidy and net metering. Contact us for a site assessment and a fully transparent proposal.