India Continues With Green Push As Renewables Become Cheaper Under GST Reforms
While the government extended incentives for clean energy, it also raised GST on coal and lignite from 5 per cent to 18 per cent.
The Goods and Services Tax (GST) Council’s 56th meeting in New Delhi has brought in sweeping changes aimed at bolstering India’s transition towards clean energy.
Chaired by Union Finance Minister Nirmala Sitharaman, the Council announced a sharp cut in GST for renewable energy devices and manufacturing parts from 12 per cent to 5 per cent. The new rates will take effect from September 22.
Relief for Green Technologies
Addressing the press after the meeting, Sitharaman explained that the decision covers a wide range of renewable products. “GST has been reduced from 12 per cent to 5 per cent on renewable energy devices and parts for their manufacture such as biogas plants, windmills, wind-operated electricity generators, waste to energy plants, devices, PV cells, whether or not assembled in modules or made up in panel, solar cookers, solar water heaters and systems, and so on,” she said. The tax reduction is expected to lower project costs, improve tariff competitiveness and make solar, wind and hybrid projects more viable.
Alongside this, the Council lowered the GST on non-lithium-ion batteries, including lead acid, sodium and flow batteries, from 28 per cent to 18 per cent. These technologies are vital for large-scale storage of renewable energy. Lithium-ion batteries, however, will remain taxed at 18 per cent.
Boost for Electric Mobility and Hydrogen
The reforms extended to clean mobility as well. While electric vehicles continue to attract 5 per cent GST, fuel cell-powered vehicles—cars, buses and trucks—will now also fall under the 5 per cent category, down from 12 per cent. This is in line with the government’s National Green Hydrogen Mission, which seeks to encourage hydrogen-based transport solutions.
Industry watchers believe the decision will encourage investment from major energy firms, including Reliance Industries, Adani Group, Tata Power, NTPC, Waaree Energies and ReNew, while paving the way for new entrants.
Higher Tax on Coal to Balance Revenue
While the government extended incentives for clean energy, it also raised GST on coal and lignite from 5 per cent to 18 per cent. However, the burden is likely to be partly cushioned by the removal of the compensation cess. Currently, coal attracts an effective rate of 15–40 per cent depending on grade. The revised structure is expected to simplify taxation while aligning fiscal policy with India’s climate goals.
Solar Power Costs to Fall
Analysts note that cutting GST on solar devices will reduce installation costs and improve adoption among households, businesses and farmers.
Developers estimate that the reforms could cut solar power costs by 10–15 per cent. For utilities, an 8 percentage point reduction in GST could reduce project expenses by Rs 30 to Rs 35 lakh per MW, translating into a drop of around 10 paise per unit in tariffs for new projects, reported Financial Express.
India’s Clean Energy Milestone
The timing of the reforms coincides with India achieving a key milestone in its energy transition. Non-fossil fuel sources now account for half of the nation’s total installed power capacity, at 242.78 GW out of 484.82 GW. The government had initially targeted this benchmark for 2030, but it has been met five years in advance.
By trimming GST on renewables and raising it on coal, policymakers are betting on a future where green energy takes centre stage in India’s growth story, while providing fiscal support for states and strengthening long-term energy security.
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