Explained: How GST Cuts On Clean Energy Will Benefit Homes, Farmers, And Businesses

In a major step to make renewable power more affordable, the Government has decided to reduce Goods and Services Tax (GST) on renewable energy devices from 12 per cent to 5 per cent.

The decision, taken at the 56th GST Council meeting and set to be effective from 22 September, is expected to lower costs across the clean energy sector and bring benefits to households, farmers, industries, and developers.

Cheaper Rooftop Solar for Homes

The GST cut will directly reduce the price of rooftop solar systems. A typical 3 kW system will now cost about Rs 9,000– Rs 10,500 less.

This is expected to accelerate the adoption of rooftop solar under the PM Surya Ghar: Muft Bijli Yojana, making it easier for lakhs of families to switch to renewable power.

Relief for Farmers Under PM-KUSUM

Farmers are set to save significantly on solar irrigation pumps under the PM-KUSUM scheme.

A 5 HP solar pump, usually priced at around Rs 2.5 lakh, will now be cheaper by nearly Rs 17,500.

With 10 lakh such pumps targeted, the reform could bring collective savings of about Rs 1,750 crore, reducing irrigation costs and promoting sustainable farming.

Lower Power Costs for Industries and DISCOMs

The reform is also expected to reduce the capital cost of utility-scale solar projects.

Developers are expected to achieve savings of Rs 20–25 lakh per MW, which, at the scale of a 500 MW solar park, could lower project costs by over Rs 100 crore.

These reductions will improve tariff competitiveness, helping distribution companies (DISCOMs) cut power procurement costs by Rs 2,000–3,000 crore annually.

Ultimately, this makes electricity more affordable for industries and end consumers.

Boost to Domestic Manufacturing and Jobs

With module and component costs expected to fall by 3–4 per cent, Indian renewable energy manufacturers will gain a competitive edge.

This aligns with the government’s Make in India and Aatmanirbhar Bharat initiatives.

By 2030, India aims to build 100 GW of solar manufacturing capacity.

The Ministry of New and Renewable Energy estimates that GST rationalisation could support 5–7 lakh new green jobs over the next decade, strengthening the clean energy ecosystem.

Advancing India’s Climate Goals

Lower costs and faster project deployment will also help India scale up renewable capacity more quickly.

With plans to add 300 GW of renewables by 2030, even modest cost savings could free up investment capacity worth Rs 1–1.5 lakh crore.

Each gigawatt of solar capacity avoids about 1.3 million tonnes of CO2 annually; the GST reform could help India cut an additional 50–70 million tonnes of emissions per year by 2030.

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