GST Rationalisation Makes Rooftop Solar Cheaper by INR 10,500 for 3 kW, Saves 20-25 lakh/MW in Utility-Scale Projects
GST rationalisation on RE equipment from 12 percent to 5 percent could cut module and component cost by 3-4 percent, save INR 20-25 lakh/MW in utility-scale solar projects. Rooftop solar under PM Surya Ghar could be cheaper by INR 9,000-10,500 for a 3 kW system. A 5 HP solar pump, costing about INR 2.5 lakh, will now be cheaper by nearly INR 17,500.
September 17, 2025. By Mrinmoy Dey
For instance, the capital cost of a utility-scale solar project, which typically amounts to around INR 3.5-4 crore/MW, by INR 20-25 lakh/MW. At the scale of a 500 MW solar park, this translates into project cost reductions of over INR 100 crore, significantly improving tariff competitiveness, the Ministry said.
The reduction in GST is expected to lower levelised renewable tariffs easing the financial burden of electricity procurement for distribution companies (DISCOMs). “This could translate into nationwide annual savings of INR 2,000-3,000 crore in power procurement costs. End consumers will benefit from greater access to affordable clean electricity, reinforcing the long-term sustainability of India’s power sector,” MNRE said.
It further added that the reform will make rooftop solar systems more affordable for households. “A typical 3 kW rooftop system will now be cheaper by about INR 9,000-10,500, making it easier for lakhs of families to adopt solar energy and accelerating large-scale uptake under the PM Surya Ghar: Muft Bijli Yojana,” it said.
Farmers under the PM-KUSUM scheme will also benefit significantly. A 5 HP solar pump, costing about INR 2.5 lakh, will now be cheaper by nearly INR 17,500. At the scale of 10 lakh solar pumps, farmers collectively stand to save INR 1,750 crore, making irrigation more affordable and sustainable.
“Rural and underserved regions will also gain from cheaper decentralised solutions such as mini-grids, livelihood applications, and solar water pumps. The shorter payback periods and improved returns will empower schools, health centres, and small businesses with clean and reliable energy access,” said MNRE.
Lower GST will enhance the competitiveness of Indian-made renewable energy equipment by reducing module and component costs by 3–4 percent, supporting the Make in India and Aatmanirbhar Bharat initiatives. “With India targeting 100 GW of solar manufacturing capacity by 2030, the reform will encourage fresh investment into domestic manufacturing hubs. Considering that every GW of manufacturing creates about 5,000 jobs, the reform could support 5-7 lakh direct and indirect jobs over the next decade, strengthening India’s clean energy industrial ecosystem,” the Ministry said.
It further asserted that the GST cut will not only reduce the levelized cost of energy but also boost investor confidence, enabling faster signing of power purchase agreements and quicker project commissioning.
“Given that India plans to add around 300 GW of renewable energy capacity by 2030, even a modest 2-3 percent cost reduction can free up INR 1-1.5 lakh crore in investment capacity. Each GW of solar saves about 1.3 million tonnes of CO₂ annually; faster deployment enabled by GST rationalisation could therefore avoid an additional 50-70 million tonnes of CO₂ emissions per year by 2030,” it said.
The revised GST rates will come into effect from September 22, 2025. “This decision will directly benefit millions of consumers, farmers, developers, and manufacturers, while contributing to the twin goals of green growth and energy independence,” MNRE stated.
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