Government Cuts GST on Solar Panels to 5%: Key Updates

The Indian Government has taken yet another step in terms of promoting renewable energy by reducing the GST (Goods and Services Tax) on solar panels and other related equipment to 5%. This decision, which came out officially in September 2025, is highly expected to lower the overall cost of solar projects for both commercial and residential users.

This particular move not only makes clean energy more affordable for all solar panel installers but also rightly accelerates India’s mission of reducing dependence on fossil fuels and expanding renewable capacity.

This recent update has certainly generated excitement across the entire solar industry, with manufacturers, distributors, installation service providers and consumers looking forward to yielding the maximum benefits out of it. 

But what does this GST cut really mean to businesses, households, and India’s solar sector? Let’s break it down. 

Why the GST Cut Matters

Before this announcement, solar panels and their related equipment were subjected to a GST rate of about 12%, which most often pushed up the capital costs for installations. Given the new 5% GST slab, as a buyer, you can expect significant changes. 

This cost reduction remains meaningful for homeowners who are planning to install rooftop solar systems and for businesses interested in investing in large-scale solar-dependent projects.

By bringing down the upfront expenses, the government aims to:

• Support medium and small enterprises with affordable, clean energy available by their side. 
• Encourage more homeowners to rightly adopt rooftop solar systems to generate electricity for their daily appliance usage needs.
• Accelerate India’s renewable energy target of achieving 500 GW capacity by the year 2030.

How It Impacts Residential Consumers

For households, switching to solar power remains a better long-term investment. The reduced GST can directly lower the cost of purchasing and installing the solar panels, further letting the payback periods be shorter. 

To say with an example, a typical 3 kW rooftop system that earlier cost around ₹1.5 to 1.6 lakh might now see a reduction of ₹6,000 to ₹8,000, post the tax cut.

• When combined with various available subsidies by the MNRE (Ministry of New and Renewable Energy), homeowners can now even save more on their investments. 
• The solar panel installation subsidy does help cover up to 40% of the system costs for certain types of systems and usage needs of homeowners. 

Altogether, these incentives do make solar adoption a much easier and financially attractive choice than ever. 

Our in-house experienced solar panel experts will help in analyzing, understanding, and determining the exact investment impact you can benefit out of the recent GST cut on solar panels as a residential consumer. 

Benefits for Businesses and Industries

The GST cut impact can be felt beyond just households. Factories, commercial buildings, and institutions known for consuming high amounts of electricity can now see substantial reductions in their project budgets. 

Most of these setups require larger systems, like 50 kW, 100 kW, or even more, further letting the GST cut savings run into lakhs of rupees. 

• Lower installation costs do improve the ROI (Return On Investment) for businesses, further letting them recover from upfront invested expenses in a timely manner. 
• Adding to this, companies can now claim input tax credits, making solar power generation a smarter financial choice. 

Given the rising grid tariffs, this recent GST cut makes renewable energy a compelling option for industries that are aiming to reduce costs and meet sustainability goals. 

A Boost for Renewable Energy Targets

India is now one of the world’s fastest-growing renewable energy markets. By making solar power more affordable, the GST council’s decision does strengthen the country’s clean energy roadmap. Industry experts do believe that this particular reduction will: 

• Help states like Kerala, known to be leading the rooftop solar adoption, scale further.
• Increase the overall adoption of solar by medium and small households.
• Support the government’s ambitious goal in terms of reducing carbon emissions and achieving net zero by the year 2070.

As more and more consumers are slowly shifting toward renewable sources, the country will further reduce its reliance on coal and other kinds of fossil fuels, further leading the way for cleaner air and energy security. 

Role of Net Metering in Savings

Other than the GST cut, policies like net metering do play a critical role in terms of boosting solar adoption. Under this type of system, as a homeowner with rooftop solar installed, you get an option to send excessively generated electricity back to the grid and earn valuable credits for the same on your bills. 

With subsidy support and lower panel costs, net metering further ensures that households can save more over the entire lifetime of their systems. 

These types of consumer-friendly policies, reduced taxes, and regular maintenance and support from our solar panel experts, together help create the perfect environment for solar energy to remain as a mainstream choice for Indian families. 

What Solar Panel Installers Are Saying

Across the industry, many of them have widely welcomed the GST reduction. Installation companies are highly expected to have demand among commercial and residential projects, given the kind of price reduction GST cuts have made toward solar panels. 

Lower upfront costs will encourage people to opt for higher-capacity systems, which can further reduce their overall dependence on grid electricity. This kind of shift can drive economies of scale, leading to a more robust and reliable solar ecosystem in India. 

Choosing the Right Solar Partner

Although the GST cut remains to be a major advantage for all, it’s equally important to find and work with a reliable installation partner who can rightly guide you through the process. Starting from design and approvals to installation and timely after-sales support, the solar partner must ensure your investment delivers maximum returns. 

This is where El Sol plays a vital role. With more than 8 years of experience and having successfully completed various solar projects, El Sol specialized in tailored rooftop solar solutions across Kerala. 

We do not handle just the technical aspects of installation but also help with the subsidy applications, approvals, and preventive maintenance. 

Conclusion

The GST reduction on solar panels and their related equipment to 5% is certainly a welcoming move that directly benefits businesses, households, and the nation’s clean energy goals. 

By letting solar remain more affordable, the government is now encouraging widespread adoption of rooftop solar, reducing energy generation costs, and supporting India’s journey toward sustainability. 

At El Sol, the best and trustworthy solar company in Kerala, we ensure you can take valid advantage of the recent GST cut and subsidies, further letting your transition to clean energy remain smooth and hassle-free. 

If you are considering switching to solar, then our solar panel experts are one phone call away to elaborate on the latest GST cut benefits and the importance of grid independence.