GST Council cuts tax on renewable energy equipment to 5 pc

New Delhi, Sep 4 The Goods and Services Tax (GST) Council has reduced the tax on renewable energy devices and manufacturing parts from 12 per cent to 5 per cent, effective from September 22 this year.

The Council also raised the tax on coal and lignite from 5 per cent to 18 per cent to offset revenue losses for state governments.

The Council has lowered the GST on non-lithium-ion batteries, including lead acid, sodium, and flow batteries, from 28 per cent to 18 per cent to scale grid-scale energy storage technologies for storing renewable power for longer durations. The GST for lithium-ion batteries shall remain 18 per cent.

"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," Union Finance Minister Nirmala Sitharaman said.

Further, the tax on hydrogen vehicles using fuel cell technology, such as cars, buses, and trucks has been reduced from 12 per cent to 5 per cent, while Electric Vehicles (EVs) will continue to attract a 5 per cent GST.

Analysts said that reducing GST rates on clean energy technologies like solar, wind, and batteries can decrease project costs and enhance the competitiveness of renewable power.

The GST 2.0 reforms reduced GST primarily to two slabs, 5 per cent and 18 per cent from the erstwhile four-slab regime. The prices of consumer goods are expected to come down due to the lower taxes, leading to an increase in demand and spurring growth in the economy.

HSBC Global Investment Research had projected the commissioning of 11.7 GW of thermal power, 3.8 GW of hydropower, and 36 GW of solar power in India during FY26. The overall power demand increased 4.4 per cent Year on Year in August and over 2 per cent in July upon a low base.

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