GST On Renewable Energy Devices Cut To 5%; Muft Bijli Yojana Rooftop Solar To Be Cheaper By ₹9,000–10,500

India’s renewable energy sector has received a significant boost with the rationalisation of GST on renewable devices from 12% to 5%. This move, announced at the 56th GST Council meeting on September 3, 2025, aims to make clean energy more affordable while strengthening domestic manufacturing and accelerating the country’s green transition.

GST Rate Cut to 5% on Renewable Energy Devices

The reduced GST rate is set to lower the capital costs of utility-scale projects. For instance, a 500 MW solar park could now save more than ₹100 crore in project costs. Distribution companies (DISCOMs) are also expected to save ₹2,000–3,000 crore annually in electricity procurement, making clean energy tariffs more competitive.

Benefits To Households, Farmers And Rural Communities

Households installing rooftop solar systems under the PM Surya Ghar: Muft Bijli Yojana will save ₹9,000–10,500 on a typical 3 kW setup. Farmers under the PM-KUSUM scheme will benefit as well, with each 5 HP solar pump becoming cheaper by nearly ₹17,500. Collectively, savings for 10 lakh solar pumps will amount to ₹1,750 crore, reducing irrigation costs.

Rural schools, health centres, and small businesses will also gain from cheaper decentralised clean energy solutions, which now offer shorter payback periods and improved returns.

Boost To Domestic Manufacturing And Self-Reliance

The GST cut will reduce module and component costs by 3–4%, improving the competitiveness of Indian-made renewable equipment. With India targeting 100 GW of solar manufacturing capacity by 2030, this reform could attract new investments, support Make in India, and create 5–7 lakh green jobs over the next decade.

Accelerating India’s Energy Transition

The move is expected to strengthen investor confidence, enabling quicker project commissioning and signing of power purchase agreements. With India aiming to add 300 GW of renewable capacity by 2030, even a 2–3% cost reduction could free up ₹1–1.5 lakh crore in investment. The reform will also contribute to avoiding 50–70 million tonnes of CO₂ emissions annually by 2030, aligning with India’s Paris Agreement commitments.

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Conclusion

The rationalisation of GST on renewable energy devices will directly benefit households, farmers, developers, and manufacturers. By reducing costs and making clean power more accessible, this decision reinforces India’s path towards achieving 500 GW of non-fossil capacity by 2030 and advancing the vision of Viksit Bharat.

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