GST on Solar Panels in India —
Now 5% or 18%?
The current GST rate on solar panels, inverters, water heaters and pumps after the GST 2.0 cut to 5%, which items stay at 18%, EPC/installation treatment and ITC for businesses.
Solar panels now attract 5% GST (HSN 8541) — cut from 12% under the GST 2.0 reform effective 22 September 2025. The same 5% covers solar cells, solar inverters, solar water heaters, water pumps, lanterns and other renewable energy devices. Generic (non-solar) inverters and standalone batteries stay at 18%. Electricity you generate and sell is outside GST.
GST Rate on Solar Equipment — Decision Table
The current GST rate and HSN code for every common solar item, reflecting the 22 September 2025 rate cut.
| Solar Equipment | GST Rate | HSN | ITC (business) |
|---|---|---|---|
| Solar PV panels / modules | 5% | 8541 | Yes |
| Solar PV cells (individual) | 5% | 8541 | Yes |
| Solar inverter (string / micro / hybrid) | 5% | 8504 | Yes |
| Solar charge controller (MPPT/PWM) | 5% | 8504 | Yes |
| Solar water heater (FPC & ETC) | 5% | 8419 | Yes |
| Solar water pump | 5% | 8413 | Yes |
| Solar lantern / street light | 5% | 9405 | Yes |
| Generic / home-UPS inverter | 18% | 8504 | Yes |
| Standalone battery (Li-ion / lead-acid) | 18% | 8507 | Yes |
| Solar power installation (EPC, composite) | ~5% | — | Yes |
| Electricity generated & sold | Outside GST | — | — |
Rates reflect the GST 2.0 renewable-energy-device rate of 5% effective 22 September 2025 (earlier 12%). Confirm the exact HSN and rate on the official GST portal before invoicing.
Which Items Are 5% and Which Stay 18%?
The deciding factor is whether the item is a renewable energy device designated for solar use. Solar-designated equipment moved to 5%; general-purpose electrical goods and standalone batteries remain at 18%.
Solar / renewable devices
- Solar PV panels, modules & cells
- Solar inverters & charge controllers
- Solar water heaters & water pumps
- Solar lanterns, street lights, cookers
- Composite solar power generating systems
General-purpose goods
- Home-UPS / generic inverters
- Standalone lithium-ion & lead-acid batteries
- Mounting structures billed separately as steel
- Pure works-contract installation service
- Cabling & fittings sold on their own
A "solar inverter" is 5% but a "home UPS inverter" is 18% — the description on the invoice matters. Ask your installer to clearly label each item as solar-designated, and to bill a battery separately so it does not drag the whole invoice to 18%.
Not sure how your solar quote should be taxed?
Get My GST Rate →GST on Complete Solar Systems & EPC Contracts
When a contractor supplies and installs a complete solar power generating system, it is a composite supply whose principal supply is the solar equipment. The concessional 5% applies to the equipment; the CBIC deeming rule splits an EPC/works contract 70% goods : 30% service, so the blended rate is well below 18%.
- A composite supply of a solar power generating system takes the 5% device rate on the goods portion.
- A pure works contract (labour-only installation, no equipment supply) is taxed at 18%.
- Ask for an itemised invoice separating solar equipment (5%), batteries (18%) and service.
How GST Adds Up — ₹1,00,000 of Panels
5% Solar panels (new rate)
18% Old 12% vs generic 18%
On ₹1 lakh of panels the 5% rate costs ₹5,000 GST versus ₹12,000 under the old 12% — a ₹7,000 saving that lowers overall rooftop-solar project cost by roughly 8-10%.
Under PM Surya Ghar Muft Bijli Yojana, residential rooftop systems get a central subsidy. GST is charged on the full equipment value on the invoice; the subsidy reduces your net cost separately and does not change the 5% GST base.
Installing solar for a business? Get the GST and ITC on your quote checked.
Get Solar GST Advice →ITC on Solar Panels — Who Can Claim It?
A GST-registered business can claim Input Tax Credit on the 5% GST paid on solar equipment when the electricity is used for its taxable business supplies. ITC is blocked for personal/residential use and is restricted where the output (electricity) is exempt.
| Purchaser | ITC on solar | Condition |
|---|---|---|
| Factory / industrial unit | Yes | Captive power for taxable manufacturing |
| Commercial office / mall | Yes | Power used for taxable business activity |
| Hotel / restaurant | Yes | Power used in GST-taxable hospitality |
| Residential (personal use) | No | Individual consumer — no business use |
| Solar power developer (IPP) | Restricted* | Electricity supply is exempt — ITC largely blocked |
* Where output electricity is an exempt supply, ITC is proportionately blocked under the exempt-supply rules. Take advice for IPP / captive-with-sale models.
Section 80EEB is an income-tax deduction (up to ₹1.5 lakh) on interest for an electric-vehicle loan — it does not apply to solar panels or solar loans. Businesses instead claim depreciation under Section 32 on capitalised solar assets; residential buyers rely on PM Surya Ghar and state subsidies.
Want your solar equipment ITC claimed correctly?
Talk to a GST Expert →Solar Business GST Compliance Checklist
For solar dealers, installers and EPC contractors, correct HSN classification and rate is the first line of GST hygiene. Here is the full compliance picture:
- GST registration (GSTIN)
- Correct 5% vs 18% classification
- Right HSN on every line item
- Battery billed separately at 18%
- EPC composite-supply invoicing
- Tax invoice / e-invoice
- E-way bill above ₹50,000
- GSTR-1 (outward supplies)
- GSTR-3B (monthly/quarterly)
- ITC reconciliation (GSTR-2B)
- Exempt-supply ITC reversal (IPP)
- GSTR-9 annual return
After the 22 September 2025 cut, the biggest GST error in solar invoicing is mixing a 5% solar system with an 18% battery on one line. Split them: keep solar devices at 5% and standalone storage at 18% so neither the customer nor the department can dispute your rate.
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