The Indian government has announced a major tax relief for the renewable energy sector by reducing the Goods and Services Tax (GST) on solar and wind equipment from 12 percent to 5 percent. The change, which takes effect on September 22, 2025, is expected to lower project costs, boost clean energy adoption, and strengthen India’s ambition of achieving its renewable energy targets.
The lower GST rate will cover a wide range of technologies, including solar panels, solar water heaters, biogas plants, wind turbines, and even emerging solutions such as hydrogen-powered fuel cell vehicles. According to industry analysts, the move could bring down project capital costs by nearly 5 percent and reduce tariffs for renewable power by 10 to 15 percent. This is likely to make solar and wind energy more competitive and attractive for both developers and consumers.
At the same time, the government has increased GST on coal and lignite from 5 percent to 18 percent, though the earlier compensation cess has been removed to offset the additional burden. By making fossil fuels costlier and green technology more affordable, the policy signals a clear shift toward sustainable energy development.
Experts believe the reform will particularly benefit projects under development and encourage fresh investments in renewable infrastructure. It is also expected to stimulate demand for solar rooftop systems, wind projects, and other decentralized energy solutions, especially in states with ambitious clean energy plans.
Prime Minister Narendra Modi welcomed the decision, calling it a “next-generation reform” that will support the common man, farmers, and businesses while also promoting ease of doing business. The announcement has already generated positive sentiment in financial markets, with renewable energy companies witnessing renewed investor interest.
Overall, the GST reduction on renewable energy equipment is seen as a timely policy intervention that will help accelerate India’s clean energy transition, make green technologies more affordable, and provide momentum to the country’s long-term sustainability goals.
