New GST Reduction Set to Benefit Renewable Energy Investors by Up to ₹1.5 Lakh Crore

Key Takeaways

The GST on renewable energy equipment has been reduced from 18% to 5%, expected to save investors up to Rs 1.5 lakh crore by 2030.
This tax reduction aligns with India’s goal of achieving 500 GW of renewable energy capacity by the end of the decade.
Farmers and households will see significant savings, with estimates of Rs 1,750 crore saved on solar pumps and up to Rs 10,500 on rooftop solar systems.

GST Reduction Benefits Renewable Energy Sector

Union Minister for New & Renewable Energy, Pralhad Joshi, announced significant savings for investors in the renewable energy sector due to a reduction in the Goods and Services Tax (GST) on renewable energy equipment. The tax cut, effective from September 22, brings the rate down from 18% to 5%, aligning with the beginning of the Navratri festival.

During a press conference at the CII 6th International Energy Conference, Joshi highlighted the financial impact of this reduction, estimating that investors could save between Rs 1 lakh crore and Rs 1.5 lakh crore by 2030. This financial relief is expected to greatly facilitate India’s ambitious target of achieving 500 GW of renewable energy capacity by 2030.

The Ministry of New & Renewable Energy outlined that to meet the goal of adding approximately 300 GW of renewable capacity, even a modest cost reduction of 2-3% could liberate Rs 1-1.5 lakh crore in investment. Notably, the PM Surya Ghar: Muft Bijli Yojana, which provides rooftop solar systems, will see reduced costs of Rs 9,000-10,500 for a 3 kW system. Furthermore, farmers under the PM-KUSUM scheme are estimated to save Rs 1,750 crore concerning 10 lakh solar pumps due to the GST cut.

At the COP26 climate summit in 2021, Prime Minister Modi outlined a roadmap for India’s clean energy transition, committing to achieving 500 GW of non-fossil fuel capacity by 2030—a target viewed by many as ambitious. Joshi proudly reported that the country has already achieved over 50% of its installed power capacity from non-fossil sources, surpassing initial projections by five years. Currently, 252 GW of the 500 GW target has already been met.

Moreover, Joshi mentioned that nearly 20 lakh households have benefited from solar power through the PM Surya Ghar scheme. Additionally, Madhya Pradesh has successfully secured the lowest-ever price for solar power coupled with battery storage during a recent auction, setting a new benchmark at Rs 2.70 per unit.

In total, the Indian government has planned a robust transmission system aimed at sustaining approximately 537 GW of renewable energy capacity by the end of this decade. This comprehensive strategy underlines the nation’s commitment to transitioning towards cleaner energy solutions while providing economic benefits to residents and industries alike.

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