I almost walked away from a 5kW rooftop project last year because the “final” quote looked nothing like the initial estimate. The culprit? A messy misunderstanding of how the solar panel GST rate actually hits your wallet. My installer quoted 12%, the government announced 5%, and the hardware stores were still charging 18% for mounting frames.
It was a total headache. But after digging through the Ministry of Finance notifications, I found the “sweet spot” that saved me nearly ₹22,000.
If you’re looking to switch to clean energy, you need to understand that the tax man doesn’t just look at the panels. They look at how you buy them.
1. The 5% Revolution: A Massive Win for Homeowners
Back in September 2025, the GST Council threw a massive bone to the renewable energy sector. They slashed the solar panel GST rate from 12% down to 5%. This isn’t just some “corporate subsidy.” It’s a direct price cut for anyone buying PV modules, solar water heaters, or even solar lanterns.
Why did they do it? To hit that 500GW green energy target.
But here is the catch. This 5% rate only applies to the goods. If you buy a standalone inverter or a specialized lithium-ion battery without the panels, you might still get hit with an 18% tax.
2. Master the 70:30 Composite Supply Rule
This is where most people get ripped off. A solar installation isn’t just “buying a product.” It’s a service. In India, the government uses a “70:30” formula for EPC (Engineering, Procurement, and Construction) contracts.
- 70% of the value: Taxed at the lower solar panel GST rate (currently 5%).
- 30% of the value: Taxed as a service (usually 18%).
In my testing, I found that many local installers try to bill the whole project at a “flat” rate of 12% or 13.8%. Don’t fall for it. Insist on a split bill. By ensuring 70% of your project is pegged to the 5% goods rate, your effective tax rate drops to roughly 8.9%.
3. Standalone Components: The 18% Trap
Thinking of DIY-ing your setup? Be careful. If you walk into a store and buy just the mounting structures (HSN 7308) or DC cables (HSN 8544), you’ll likely pay 18% GST. These are seen as “general hardware” rather than “solar specific.”
I learned this the hard way when I tried to “cut costs” by sourcing my own mounting rails. The 18% tax ate my savings instantly. Always try to bundle these accessories under the primary solar panel GST rate by buying them as part of a complete “Solar Power Generating System” kit.
4. Business Perks: Claiming Your Input Tax Credit (ITC)
If you own a registered business, the solar panel GST rate isn’t an expense—it’s a credit. Unlike residential users who just pay and forget, a business can claim the GST back against their output tax liability.
- Manufacturing Units: Can use ITC to offset high energy costs.
- Commercial Offices: Lower the “payback period” of the system by 12-15%.
Just make sure your GSTIN is on the invoice. No ID, no credit.
5. PM Surya Ghar and the Hidden Math
The PM Surya Ghar: Muft Bijli Yojana is the talk of 2026. While the subsidy covers a huge chunk of the 3kW systems, the solar panel GST rate still applies to the base price before the subsidy kicks in.
I’ve seen families save upwards of ₹10,000 just because the recent rate cut lowered the “taxable value” of the panels before the MNRE (Ministry of New and Renewable Energy) subsidy was applied. It’s a double-win.
Stop Overpaying Today
The world of Indian taxation changes fast. One day it’s 12%, the next it’s 5%. But the goal remains the same: stop burning coal and start catching rays.
Are you going to let a 13% tax difference stop you from zeroing out your Tata Power or Adani Electricity bill? Or are you going to demand a transparent, 70:30 split invoice from your installer?
The choice is yours.
Wait! Are you an installer or a homeowner? Check out our internal guide on 7 Insane Facts: How Much Electricity Does a Solar Panel Produce in 2026?
For official legal text, you can always check the CBIC Government Portal.