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RE Industry Seeks GST Cuts for BESS, EPC Services Ahead of October 8 Council Meet

The renewable energy industry is seeking GST reductions on BESS and renewable energy EPC services along with review of Input Tax Credit (ITC) framework ahead of the GST Council meeting scheduled for October 8, 2026. Energetica India speaks with stakeholders to gauge expectations.

October 07, 2026. By Mrinmoy Dey

The 57^th GST Council Meeting is scheduled to take place on October 8, 2026. The meeting, after a year-long hiatus, presents a significant opportunity to advance long-pending industry reforms, which is to balance and streamline uniformity in the GST rates for the renewable energy industry.

The industry’s expectations are high given the government’s focus on renewable energy and deployment of Battery Energy Storage Systems (BESS). Last year, the government reduced GST on a wide range of renewable energy devices and parts to 5 percent from 12 percent earlier. Energetica India spoke with various industry stakeholders to gauge their expectations.

BESS Industry Backs GST Cut from 18 Percent to 5 Percent
Industry leaders in India’s energy storage sector are seeking a GST reduction on containerised BESS from 18 percent to 5 percent. The National Solar Energy Federation of India (NSEFI) earlier wrote to the Ministry of New and Renewable Energy (MNRE) seeking alignment of GST on standalone BESS with renewable energy equipment such as solar modules. It said the existing 18 percent GST makes energy storage projects less competitive despite the growing role of BESS in integrating renewable energy into the grid.

Harsh Shah, CFO, Advait Greenergy, said, “A reduction in GST on containerised BESS from 18 percent to 5 percent would be meaningful because storage is still a capital-intensive part of the renewable-energy ecosystem. When you reduce the tax burden on a major project component, the immediate benefit is lower upfront project cost. That can also reduce the amount of capital that needs to be financed and improve the economics available to developers when they bid for storage projects.”

He further added that a lower GST rate can support that by reducing capex and financing pressure. Ultimately, the benefit should be assessed not just in terms of cheaper batteries, but in terms of making storage more commercially viable as part of India's power system.

Hanish Gupta, Founder and MD, Sunkind India, said, “For BESS projects, where upfront capital expenditure is significant, the tax incidence directly affects project economics and the amount of capital that needs to be deployed upfront. A lower GST rate can reduce the tax burden and improve project cash flows, although the actual impact on overall project cost will also depend on the treatment and utilisation of input tax credit.”

He further added, “More importantly, rationalising GST on BESS can improve the bankability and tariff competitiveness of storage projects at a time when India needs to rapidly scale storage capacity. The objective should be to ensure that taxation does not become an additional barrier to deploying storage alongside solar and wind.”

Anand Kabra, Chairman and Managing Director of Kabra Extrusiontechnik and Geon, said, “BESS is becoming an important part of India’s evolving power infrastructure, and the tax treatment of its components has a bearing on project economics. A reduction in GST on BESS containers could help reduce the upfront cost burden and improve the overall cost structure of storage projects. This would be particularly relevant as grid-scale deployments increase.”

Udyut Goyal, Business Development Head, AmpereHour Energy, emphasises, “Reducing GST on BESS containers from 18 percent to 5 percent would certainly help improve the economics of grid-scale storage projects. BESS is still a relatively capital-intensive technology, and every component of the upfront cost has a bearing on the final tariff. A lower GST rate can ease the initial cost burden and make storage projects more competitive.”

Manoj Singh, Director General, DIPA, said, "Grid-scale storage is absolutely critical for integrating renewable energy into India's national grid, and reducing the Goods and Services Tax on Battery Energy Storage System containers from 18 percent to 5 percent is a non-negotiable step to unlock commercial viability. A 13 percent reduction in tax on these essential components will directly translate into a significant lowering of total project capital expenditure. High storage costs have historically restricted the scale of clean power distribution. Lowering this tax ensures that storage tariffs drop to an affordable level, allowing digital and physical infrastructure networks to transition seamlessly to round-the-clock green power.”

Kamlesh Kataria, Chief Growth Officer, Kalpa Power emphasises that battery storage is still a new technology in India, and next to technology, the high capex is the biggest hurdle. “Customers usually prefer an OPEX model, and a high GST rate directly raises the upfront cost that has to be recovered through the tariff. So, lowering the GST component would be an advantage in making tariffs more viable for the end customer,” he said.

He further added that since there is no VGF or subsidy support for storage today for the C&I segment, GST is the one lever that can bring costs down. “Taking BESS containers to 5 percent would make storage-linked tariffs as well as CAPEX projects far more commercially viable and speed up the adoption of round-the-clock (RTC) renewable power,” he said.

Dilip Mehta, Director – Technical (Engg, Procurement, QHSE), Hexa Climate, remarked, “Batteries sit at 18 percent under HSN 8507 while solar modules came down to 5 percent last year. A containerised BESS is the same asset doing the same job in the same project, taxed very differently. Bringing it to 5 percent would take a meaningful amount out of storage capex, and storage is now mandatory in most utility tenders.”

Lower Tax Could Boost Domestic BESS Manufacturing
Industry stakeholders also expect GST rationalisation to support domestic manufacturing by increasing demand for energy storage systems and encouraging capacity expansion and technology development.

Lower taxation could improve the affordability of battery storage for utilities, renewable energy developers, industrial users and commercial consumers while supporting deeper integration of solar and wind power into the grid.

The measure could also complement existing policy support, including viability gap funding and large-scale storage procurement programmes, as India seeks to expand BESS capacity alongside its renewable energy ambitions.

Vivek Kapoor, Chief Technology Officer (CTO) at Best Power Equipments India (BPE), said, “A lower GST would reduce the upfront cost of projects and make energy storage tariffs more competitive. At the same time, we need a simple and consistent tax structure across the BESS value chain. That clarity will give manufacturers and developers the confidence to invest and help us scale storage faster.”

EPC Services GST Cut Also on Industry Agenda
The GST Council may also consider reducing GST on the services component of renewable energy EPC contracts from 18 percent to 5 percent, bringing it in line with renewable energy equipment.

At present, renewable energy EPC contracts are taxed under a 70:30 mechanism. Under this framework, 70 percent of the contract value is treated as supply of goods and taxed at 5 percent GST, while the remaining 30 percent is classified as supply of services and attracts 18 percent GST. This results in an effective GST rate of 8.9 percent on the overall contract. The industry is seeking a flat 5 percent rate for the entire EPC contract.

Manoj Mishra, Partner and Tax Controversy Management Leader, Grant Thornton Bharat, said, “The services component of EPC contracts is taxed at 18 percent under the 70:30 mechanism, an effective rate of about 8.9 percent, while standalone BESS attracts 18 percent even as storage becomes integral to renewable deployment. Moving both towards 5 percent would improve consistency and project economics, and a flat EPC rate would also reduce disputes over the goods vs services split.”

Mehta added, "On EPC, the 70:30 deemed split gives an effective 8.9 percent. A flat 5 percent is worth 3.9 points, but the larger benefit may be the simplification. A deemed ratio invites argument about the actual apportionment between goods and services, and that is where the litigation comes from. A single rate removes the classification question rather than just lowering the number."

“The existing 70:30 mechanism provides a framework for taxation, but the classification of goods and services within complex renewable EPC contracts can create additional compliance requirements and scope for interpretation,” Gupta said.

He further added that a flat 5 percent structure, if designed with a clear and seamless input-tax-credit mechanism, could simplify compliance, reduce classification-related disputes and allow developers and EPC companies to build project costs with greater certainty.

Shah asserts that an EPC project is not executed in neat tax categories on the ground. “Engineering, procurement, civil works, electrical systems, installation and commissioning are all parts of delivering one operating asset. When the tax framework requires these activities to be treated through predetermined goods-and-services proportions, it can create questions around classification and valuation,” he said.

He further added, “A uniform rate would therefore do more than reduce the headline tax burden. It could simplify contracting and invoicing, improve cost predictability and reduce the scope for disputes over how individual components of a project should be classified.”

Kapoor opined, “The current 70:30 split not only pushes the effective rate to 8.9 percent but also creates compliance and interpretation issues, which often lead to disputes. A flat rate would ease compliance and give developers and EPC players better cost visibility. It would also help projects move faster and make the overall ecosystem more efficient.”

Kataria remarked, “A flat rate makes life simpler for everyone. The 70:30 split means that work orders and invoices both have to be divided between goods and services, which complicates the accounting and financing processes. Additionally, in practice, the goods component often exceeds 70 percent, which invites disputes. A single 5 percent rate would cut compliance efforts, reduce litigation, and allow projects to move faster from award to commissioning.”

Lower EPC GST Could Reduce ITC Accumulation
The proposed reduction assumes significance because electricity generation and supply are exempt from GST. Since electricity output does not attract GST, renewable energy project developers cannot utilise accumulated Input Tax Credit (ITC) against output GST liability. A reduction in the effective GST rate on EPC contracts could therefore reduce ITC accumulation and minimise the impact of the inverted duty structure.

Kannan Krishnan, Managing Director, Jakson Green, asserted that the GST Council Meeting will be instrumental in accelerating the broader financial reform agenda, particularly through a review of the Input Tax Credit (ITC) framework aimed at removing the legal, procedural and administrative bottlenecks that impede the seamless flow of credit across the value chain.

He further adds, “The most effective long-term solution would be the adoption of a single-rate GST structure. In the absence of such a framework, several VAT jurisdictions (global markets) allow businesses to claim refunds for accumulated ITC at the end of a tax period. While it may be unrealistic to expect the GST Council to implement such a comprehensive reform immediately, its strong track record of responding to pressing industry concerns suggests that it can take an important first step. This could be achieved by expanding the scope of Inverted Duty Structure (IDS) refunds to include capital goods and services, at least on a partial basis, supported by a clear roadmap for gradual expansion in the future.”

Kataria elucidates, "Developers like us sell electricity under PPAs, and there is no GST on electricity. So, there is no input tax credit. Even a few percentage points of capex translate into a significant component of the tariff. Whatever GST we pay on inputs therefore ends up as a cost in the project, rather than something we can recover. Every percentage point of GST saved on capex can flow directly into a lower tariff."

“Electricity sits outside GST, so a generator has no output tax liability to set input credits against. GST paid on equipment is not a timing difference for us. It is a cost that stays in the project and ends up in the tariff,” explained Mehta.

Mishra added, “The renewable energy sector expects the GST Council to address the tax frictions that persist despite last year's rate rationalisation. While equipment moved to 5 percent in September 2025, several inputs and input services still attract 18 percent, leading to accumulated ITC and locked-up working capital. Refunds under the inverted duty mechanism do not extend to input services and capital goods, which limits relief for manufacturers and EPC players. Bringing these credits within the refund framework would be a meaningful correction.”

Gupta added, “As technologies such as battery storage, hybrid renewable projects and renewable-plus-storage systems become more mainstream, there is a need for clear and consistent GST classification and treatment for these emerging business models. the industry would also benefit from a predictable mechanism for utilisation or refund of eligible input tax credit, particularly because renewable energy projects are capital-intensive and operate on long investment horizons. Any avoidable accumulation of tax credit can create a working-capital burden.”

Talking about the bio-gas sector, Piyush Sohani, Managing Director, Sistema.bio India, said, “Waiving the 5 percent GST on biogas would remove a significant cost barrier for smallholder farmers and make clean energy infrastructure more accessible across rural India. For households operating under tight capital constraints, even a modest reduction in upfront costs can shorten the payback period and accelerate adoption. At scale, farm-level biogas can help millions of households convert animal and organic waste into clean cooking fuel and bioslurry, reducing dependence on LPG and imported fossil fuels. This is not just a tax measure; it is an opportunity to strengthen rural energy independence, create value from agricultural waste, and contribute to reducing India’s crude oil import burden. A more supportive GST regime can help unlock the full potential of biogas as a decentralised clean energy solution.”

“Beyond rate reductions, clear classification and predictable treatment across different components and project structures would help developers and technology providers plan investments with greater confidence and reduce avoidable uncertainty during project execution,” asserted Goyal.

"India’s renewable energy target is ambitious, and penetration is rising, but accelerated depreciation and subsidies are no longer available to the extent they were previously. For faster adoption across industries, some benefits must be passed on to the end consumer, and lower GST is the most direct way to do so. We expect the Council to maintain a flat and lower GST rate for renewables and storage, at the minimum. That would open up more projects and make them viable for customers and developers alike," said Kataria.

Talking about the probable impact on tariff if both BESS and EPC GST cut is approved, Mehta remarked, "Taken together, on a storage-heavy firm and dispatchable project, the combined effect would show up at the tariff level, in the range of a few paise a unit."

He further added, "Beyond the rates, two things would help. Uniform classification, so advance rulings stop diverging between states. And a clear transition for projects already bid on the current structure."