In a significant policy shift, the Union Government has reduced the Goods and Services Tax (GST) on the entire renewable energy value chain from 12% to 5%.
Union Minister for New and Renewable Energy, Pralhad Joshi, stated that this move could result in savings of up to ₹1–1.5 trillion by 2030.
The step is aimed at supporting India’s target of 500 gigawatts (GW) of installed renewable energy capacity by the end of the decade. Currently, India has already achieved 252 GW.
Speaking about the impact, Joshi said that of the remaining 248 GW India plans to add over the next five years, this tax relief will bring ‘the biggest advantage’ in lowering project costs and improving affordability for all stakeholders, including end consumers.
Lower Project Costs and Affordable Power
The Ministry of New and Renewable Energy highlighted that the reduced GST rate will significantly cut capital costs for clean energy projects.
For instance, the cost of setting up a 1 MW utility-scale solar project—typically around ₹3.5 to ₹4 crore—will now be lower by ₹20–25 lakh.
For a 500 MW solar park, this translates to savings of over ₹100 crore, directly improving tariff competitiveness and reducing electricity bills for consumers.
At the domestic level, a 3 kW rooftop solar system will now be around ₹9,000 to ₹10,500 cheaper, encouraging widespread adoption under schemes such as PM Surya Ghar: Muft Bijli Yojana.
Push for Indigenous Solar Manufacturing
The government is also laying the groundwork to strengthen the entire domestic solar value chain—covering wafers, ingots, and polysilicon.
Plans are underway to introduce Viability Gap Funding (VGF) and Production Linked Incentives (PLI) to support this effort.
Minister Joshi confirmed that the government is building a roadmap for ingot and wafer production in India and will soon release an approved list of manufacturers.
The ministry has already issued a draft proposal for ‘ALMM List III’ (Approved List of Models and Manufacturers) for solar wafers, which will take effect by June 2028 if three independent Indian facilities together achieve a manufacturing capacity of 15 GW.
Currently, India’s wafer manufacturing capacity stands at just 2.2 GW, and the country remains heavily dependent on imports, particularly from China.
The new policies aim to change that by building self-reliance in solar components.
The GST reduction, paired with the domestic manufacturing push, is likely to lower power costs, increase project viability, and generate green employment—accelerating India’s clean energy transition in the years to come.
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