If you’re planning a solar installation in 2026, the Goods and Services Tax (GST) rate directly affects what you pay, and what you can claim back. Solar project costs in India include panels, inverters, batteries, mounting structures, and installation labour. Each of these attracts a different GST rate, and knowing the exact figures saves you real money, especially on commercial systems where Input Tax Credit (ITC) is available.
Key takeaway. GST on solar panels (photovoltaic modules) and complete solar power generating systems is 5% since 22 September 2025, down from 12%. A supply-and-install contract is taxed on a 70:30 split (70% goods at 5%, 30% services at 18%), about 8.9% blended. Lithium-ion batteries attract 18%, and separately sold inverters can be taxed at 18%. Residential buyers under PM Suryaghar cannot claim ITC, but registered businesses can recover GST paid on solar components against their output tax liability.
This guide covers every rate in one place, panels, inverters, batteries, structures, cables, and service charges, so you can budget accurately and avoid overpaying.
What Is the GST Rate on Solar Panels in India?
Solar photovoltaic (PV) modules, the panels themselves, fall under HSN code 8541 40 11 and are taxed at 5% GST since 22 September 2025. This rate applies to both mono PERC and TOPCon bifacial panels, regardless of wattage. The MNRE benchmark cost circulars for 2025 to 26 price rooftop solar at ₹42,000–₹50,000 per kW before GST; on a supply-and-install contract at about 8.9% blended GST, the effective cost is roughly ₹45,700–₹54,450 per kW.
Solar panels attracted 5% GST until September 2021. The rate rose to 12% from 1 October 2021 and was cut back to 5% from 22 September 2025. One common misconception is that panels are “GST-free” because solar is a renewable energy priority, they are not exempt. The exemption applies only to the state electricity charges on solar-generated units in some states, not to the procurement of equipment.
It is worth noting that PM Suryaghar rules require installers, who must be vendors registered on the national portal, to use Approved List of Models and Manufacturers (ALMM)-listed panels. Heaven Green Energy sources ALMM-listed solar modules across all its projects, ensuring compliance with both MNRE and GST audit requirements.
💡 Fast tip
Always ask your EPC contractor to give you a GST-split invoice showing HSN code 8541 for panels separately from installation services, this is required if you want to claim ITC later.
GST Rates: Complete Component-by-Component Breakdown
Different solar components attract different GST rates. Here is the authoritative table for 2026 based on official GST tariff schedules and CBIC notifications:
| Component | HSN Code | GST Rate | Notes |
|---|---|---|---|
| Solar PV modules (panels) | 8541 40 11 | 5% | Mono PERC, TOPCon, bifacial all same |
| Solar string inverters | 8504 40 | 5% in a complete system; 18% if sold separately | Includes hybrid inverters |
| Lithium-ion batteries (BESS) | 8507 60 | 18% | Including LFP battery packs |
| Lead-acid batteries | 8507 20 | 18% | For off-grid systems |
| Mounting structures (steel/aluminium) | 7308 90 | 18% | Galvanized or pre-galvanized |
| Solar cables (DC cables) | 8544 | 18% | Includes MC4 connectors |
| ACDB / DCDB panels | 8537 10 | 18% | String combiner boxes same |
| Net metering energy meter | 9028 30 | 18% | Bidirectional smart meters |
| Installation & EPC services | 998319 (SAC) | ~8.9% blended | Works contract: 70% at 5%, 30% at 18% |
| O&M / AMC services | 998719 (SAC) | 18% | Annual maintenance contracts |
Source: CBIC GST tariff, HSN/SAC lookup 2025 to 26.
As you can see, panels and complete systems are at 5%, while inverters and balance-of-system (BOS) components such as cables, structures and ACDB/DCDB can be taxed at 18% when sold separately. For a typical supply-and-install contract, the blended GST rate works out to about 8.9%.
How the GST Split Affects Your Total System Cost
Let’s run the numbers on a real system to see how GST lands.
For a 5 kW residential rooftop system priced at ₹2,00,000 (before GST), the GST on a supply-and-install contract comes to about ₹17,800 (8.9% blended). That is a real cost that must be budgeted. If you are applying for the PM Suryaghar subsidy, note that the subsidy calculation is on the pre-GST project cost, you bear the GST outright unless you can claim ITC.
For a 100 kW commercial system at ₹50 lakh (before GST), the GST outflow on a supply-and-install contract is about ₹4.45 lakh. Here, a GST-registered business recovers this through ITC, making it a zero net cost over time.
Can You Claim ITC (Input Tax Credit) on Solar?
This is the most important financial question for commercial and industrial solar buyers. The answer depends on your registration and use-case.
GST-registered businesses can claim ITC on solar panels, inverters, and installation services if the solar system is used for taxable business activities. Under Section 16 of the CGST Act, ITC is available on capital goods, and solar systems qualify as capital goods under Schedule II. The key condition is that the solar power must be used in the course of your taxable business, not for personal or exempt-supply activities.
Residential buyers cannot claim ITC. If you are installing solar at your home under PM Suryaghar, you are not registered under GST, so ITC is not applicable. You simply pay the GST as part of the project cost.
Partial ITC scenarios. A hospital or educational institution that has both taxable and exempt services must apply a pro-rata ITC formula under Rule 42 of CGST Rules. Typically, hospitals can claim ITC only on the portion of solar power attributable to taxable services (pharmacy sales, diagnostic services).
- Check your GST registration status: confirm you file GSTR-3B regularly.
- Insist on itemised GST invoices: each component must be listed with HSN code and GST amount separately.
- Verify your EPC contractor’s GSTIN: an unregistered contractor cannot issue a valid tax invoice.
- File ITC claim in GSTR-3B: claim the input credit in the month you receive the invoice.
- Maintain a fixed-asset register: solar systems classified as capital goods must be tracked; ITC is claimed in the year of installation (no pro-rating needed for capital goods in most cases).
- Watch the 180-day payment rule: if you don’t pay your contractor within 180 days of the invoice date, you must reverse the ITC claimed.
⚠️ Watch out
If your EPC contractor bills the entire project as a lump sum without an itemised breakup, your GST ITC claim may be challenged during an audit. Always insist on a detailed invoice showing HSN codes for each component.
The GST Cost Optimisation Framework for Solar Buyers
We use a simple three-step process at Heaven Green Energy called the Solar GST Impact Score to help buyers understand their actual net GST cost before signing a contract.
Step 1, Map your component mix. List every component in the quotation and assign the correct GST rate (5% for panels and complete systems, about 8.9% blended for a supply-and-install contract, 18% for batteries and separately sold inverters/BOS/cables). If the quote is a single line item, ask for the breakup, a legitimate EPC company always provides it.
Step 2, Apply your ITC eligibility. If you are GST-registered and using the solar system for taxable business, your effective GST cost is zero (you recover it as ITC). If you are a residential buyer or exempt-supply entity, the GST is a real out-of-pocket cost. Write this as a “Net GST Outflow” number.
Step 3, Factor GST into payback. For residential buyers, add the net GST outflow to your total project cost before calculating payback period. Use our free solar calculator to see the corrected ROI with the real cost base.
This framework prevents a common mistake we see across our 10,000+ installations, buyers who compare quotes without realising one quote includes GST and another doesn’t, making the cheaper-looking quote actually more expensive after tax.
GST on Solar Installation Services: What the Rules Say
Installation services attract a different rate depending on how they are structured. According to the CBIC clarification on composite and mixed supplies:
- Supply-and-install (works) contract: When an EPC company supplies both goods (panels, inverters) and installation as a single contract, the 70:30 rule applies: 70% of the value is treated as goods at 5% and 30% as services at 18%, about 8.9% blended on the whole contract.
- Pure service contract: If you hire a labour contractor separately (you buy components yourself and pay labour separately), the labour service attracts 18% GST under SAC 998319. This structure is usually more expensive after tax.
For most buyers, a bundled EPC contract at about 8.9% blended GST is more tax-efficient than a split procurement + labour structure. This is one reason why working with an integrated EPC company like Heaven Green Energy, rather than separate vendors, saves money on both the project cost and the tax structure.
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PM Suryaghar and GST: How the Subsidy Calculation Works
Under the PM Suryaghar Muft Bijli Yojana, the Central Financial Assistance (CFA) subsidy is calculated on the MNRE benchmark cost, which is a pre-GST figure. The subsidy is:
- 1 kW: ₹30,000
- 2 kW: ₹60,000
- 3 kW and above: ₹78,000 (capped)
The MNRE benchmark for 2025 to 26 is ₹42,000 per kW (before GST). After adding about 8.9% blended GST on a supply-and-install contract, the effective cost per kW is approximately ₹45,738. A 3 kW system therefore costs around ₹1,37,214 (including GST) before subsidy. After deducting the ₹78,000 subsidy, your net cost is approximately ₹59,214, a payback of under 3.5 years at ₹8/kWh electricity rates.
| System Size | Pre-GST Cost | GST (~8.9% blended) | Total Cost | PM Suryaghar Subsidy | Net to Buyer |
|---|---|---|---|---|---|
| 1 kW | ₹42,000 | ₹3,738 | ₹45,738 | ₹30,000 | ₹15,738 |
| 2 kW | ₹84,000 | ₹7,476 | ₹91,476 | ₹60,000 | ₹31,476 |
| 3 kW | ₹1,26,000 | ₹11,214 | ₹1,37,214 | ₹78,000 | ₹59,214 |
| 5 kW | ₹2,10,000 | ₹18,690 | ₹2,28,690 | ₹78,000 | ₹1,50,690 |
Note: These are indicative figures based on MNRE 2025 to 26 benchmark. Actual contractor prices may vary. Subsidy is DBT into the buyer’s bank account after meter installation, see the official MNRE scheme page for the latest rates.
Pros and Cons of the Current GST Structure for Solar Buyers
- 5% rate on modules and complete systems since 22 September 2025, down from 12%
- Supply-and-install contract blends to about 8.9%, cheaper than hiring labour separately at 18%
- Businesses recover GST fully via ITC, net cost is zero
- Clear HSN codes make audit compliance straightforward
- Residential buyers cannot claim ITC, GST is a real cost
- Batteries at 18% make off-grid and hybrid systems more expensive
- MNRE benchmark subsidy does not include GST, you bear the tax gap
- Unregistered small contractors may not provide valid GST invoices
How Heaven Green Energy Helps with GST-Compliant Solar Projects
Heaven Green Energy is a GST-registered EPC company across all 25+ cities it operates in. Every invoice we issue carries the correct HSN code for each component, making ITC claims straightforward for our commercial and industrial clients.
For residential clients under PM Suryaghar, we handle the entire subsidy documentation process, including the pre-GST cost submission to MNRE, so your subsidy calculation is accurate and your net cost is minimised.
- Commercial Solar: 10 to 100 kW with detailed GST-split invoices for seamless ITC claims.
- Industrial Solar EPC: 100 kW+ projects with CA-verified tax structuring for maximum Accelerated Depreciation (AD) + ITC benefit.
- Residential Solar: PM Suryaghar end-to-end with correct subsidy paperwork.
- Solar Calculator: includes GST in total project cost for accurate payback figures.
Our team has completed over 10,000 installations and works with chartered accountants who specialise in solar tax compliance. If you need help structuring your solar project for maximum tax efficiency, contact our team for a free consultation.
Frequently Asked Questions
What is the GST rate on solar panels in India in 2026?
Solar panels (photovoltaic modules) attract 5% GST under HSN code 8541 40 11, effective 22 September 2025 (down from 12%). Both mono PERC and TOPCon bifacial panels fall under this rate, regardless of brand or wattage. Complete solar power generating systems also attract 5%; inverters sold separately can be taxed at 18%.
Is there GST on solar installation charges?
Yes. In a supply-and-install contract, 70% of the value is taxed as goods at 5% and 30% as services at 18%, about 8.9% blended. If installation is contracted separately from equipment supply, the service rate is 18%. For most buyers, a bundled EPC contract is more tax-efficient. Always confirm with your installer how they structure the contract before signing.
Can a business claim ITC on solar panel GST?
Yes. A GST-registered business that uses solar power for taxable business activities can claim full Input Tax Credit (ITC) on the GST paid on solar panels, inverters, and installation services. The solar system qualifies as a capital good under the CGST Act. ITC is claimed in GSTR-3B in the month of receiving the invoice, provided payment is made within 180 days.
What is the GST rate on solar batteries in India?
Lithium-ion batteries (including LFP battery packs for solar BESS systems) attract 18% GST under HSN code 8507 60. Lead-acid batteries also attract 18%. This higher rate makes hybrid and off-grid solar systems with battery storage more expensive than grid-tied systems. There have been industry representations to reduce battery GST to 12%, but no change has been made as of 2026.
Does PM Suryaghar subsidy cover GST?
No. The PM Suryaghar Central Financial Assistance (CFA) subsidy is calculated on the MNRE benchmark pre-GST cost. The GST on your solar system is an additional cost that the homeowner bears. For a 3 kW system, this means approximately ₹11,214 in GST is not covered by the ₹78,000 subsidy. Check the official PM Suryaghar portal for the latest benchmark rates.
Is there any state-level solar tax exemption?
Several states provide additional incentives, but these are typically subsidies or tariff concessions on electricity consumption, not GST exemptions. GST is a central tax and cannot be waived by state governments. Gujarat, Maharashtra, and Rajasthan offer state subsidies on top of PM Suryaghar for select categories, but these do not reduce the GST you pay on equipment.
What HSN code should appear on my solar panel invoice?
Your solar panel invoice must show HSN code 8541 40 11 for photovoltaic cells/modules. Inverters should show HSN 8504 40, and separately must meet BIS and IEC compliance requirements that are distinct from their GST classification. If your installer provides an invoice with an incorrect or vague HSN code, ask for a corrected invoice, a wrong HSN can cause problems during GST audits or when claiming ITC. Heaven Green Energy provides fully GST-compliant invoices as standard practice.
How much GST will I pay on a 10 kW commercial solar system?
For a 10 kW commercial system priced at approximately ₹4,00,000 (before GST), the GST on a supply-and-install contract works out to roughly ₹35,600 (about 8.9% blended). A GST-registered business recovers this entirely as ITC. A non-registered buyer (rare for commercial scale) would pay this as a net cost. Always get an itemised quote showing GST by component to verify these figures.