Solar Panel GST Rate & HSN Code 2026: 5% (HSN 8541)

Goods and Services Tax (GST) on solar in India changed again on 22 September 2025, when the 56th GST Council cut the rate on solar modules and complete solar systems from 12% to 5%. The confusion has not settled. Some EPC contractors still issue invoices at the old 12% rate, residential customers still get overcharged at a flat 18%, and commercial buyers still miss Input Tax Credit (ITC) on Balance of System (BoS) lines because the Harmonised System of Nomenclature (HSN) codes are wrong. This guide is the definitive 2026 rate reference: every HSN code that touches a solar project, every rate, the effective blended rate, and the residential vs commercial treatment side by side.

Direct answer. Since 22 September 2025, solar PV modules, cells (HSN 8541) and complete solar power generating systems attract 5% GST, down from 12%. A turnkey supply-and-install solar contract (a works contract) uses the 70:30 deemed split: 70% of the contract value is taxed as goods at 5% and 30% as services at 18%, an effective rate of about 8.9%. Inverters, lithium-ion batteries, mounting structures and cables bought separately, outside a complete system, are commonly invoiced at 18% under their own headings. Commercial buyers recover GST via ITC; residential buyers do not.

Read this whether you are a homeowner double-checking a vendor invoice, a Chief Financial Officer (CFO) planning a 1 MW captive plant, or a Chartered Accountant signing off on a solar capitalisation entry. The numbers below follow the GST Council’s 56th meeting decisions, the CGST rate notifications effective 22 September 2025, and the Press Information Bureau (PIB) release of 17 September 2025.

How GST on Solar Reached Current Rates in 2026

The current rate matrix is the outcome of three policy phases. When GST launched in 2017, solar PV modules and most “renewable energy devices” sat at a concessional 5%. A later Council revision raised these devices to 12%, while inverters and BoS components sold on their own stayed at 18% under their parent electrical-machinery and metal-structure headings.

The third phase began on 22 September 2025. The 56th GST Council meeting (3 September 2025) rationalised GST across the renewable energy value chain from 12% to 5%, covering solar PV cells, modules and complete solar power generating systems. The PIB release estimates that a typical 3 kW rooftop system became about ₹9,000 to ₹10,500 cheaper as a result.

The 70:30 rule for works contracts carried through the change. Where solar devices are supplied together with installation services under one contract, 70% of the gross consideration is deemed to be the supply of goods (now at 5%) and 30% the supply of services (at 18%). That gives an effective rate of about 8.9% on a typical turnkey rooftop contract. Administrative changes, such as e-invoicing at ₹5 crore turnover and the Invoice Management System (IMS) for ITC reconciliation, affect paperwork rather than rates. If you want the broader buyer-level commentary on this same structure, our GST on solar, full buyer’s guide covers the practical contracting angles. For the earlier rate context, see our companion piece on GST rates on solar panels and inverters.

The Solar GST Rate Matrix, 8 HSN Codes That Matter

Most solar invoices in India touch eight HSN/SAC codes. Know these eight and you can audit any quotation, any tax invoice, or any ITC ledger in minutes. We call this the Solar GST Rate Matrix and use it across every commercial project Heaven Green Energy bills.

Source: GST Council 56th meeting decisions and CGST rate notifications effective 22 September 2025; PIB, 17 September 2025.

Four points to flag immediately. First, the 5% rate applies to modules, cells and complete solar power generating systems, so an inverter, structure and cables supplied as part of a complete system move with the system rather than at their own rates. Second, the 70:30 split is the normal treatment for a rooftop EPC contract that combines supply and installation, which is why the effective rate on a typical residential job is about 8.9%, not 5% and not 18%. Third, an inverter sold on its own under heading 8504 can be argued at 18%, and batteries and other separately sold components are commonly invoiced at 18%. Fourth, services billed separately from any goods, such as an annual maintenance contract, carry 18%.

Component-Wise GST Rates Explained

Solar PV cells and modules (HSN 8541), 5%. This covers monocrystalline Passivated Emitter Rear Contact (PERC) panels, Tunnel Oxide Passivated Contact (TOPCon) bifacial panels, Heterojunction Technology (HJT) panels, and thin-film modules. The 5% rate applies regardless of wattage, brand, or country of origin (Customs duty is a separate matter). HSN 8541 also covers solar cells imported for assembly, relevant for domestic content manufacturers. The rate fell from 12% to 5% with effect from 22 September 2025. Browse our solar modules line-up to see the wattage and technology classes billed under this HSN code.

Solar inverters (HSN 8504), 5% inside a system, 18% sold separately. When the inverter is supplied as part of a complete solar power generating system, or within a supply-and-install contract under the 70:30 split, it travels with the system rate. An inverter sold on its own, as a replacement or an add-on, is classified under heading 8504 and can be argued at 18%. If a vendor bills a standalone inverter at 5%, ask them for the basis in writing. See our solar inverters catalogue for the string, central, and hybrid categories that fall under this HSN heading.

Lithium-ion and storage batteries (HSN 8507), commonly 18%. Battery Energy Storage Systems (BESS), residential hybrid battery packs, and standalone Lithium Ferro-Phosphate (LFP) batteries sold separately are commonly invoiced at 18%. This makes hybrid and off-grid systems more expensive after tax than grid-tied systems. We’ve covered the budgeting impact in our breakdown of how to calculate solar ROI.

Solar pumps, 5%. Solar water-pumping systems under the PM-KUSUM scheme fall within the renewable energy devices covered by the September 2025 cut. The PIB release estimates that a 5 HP solar pump costing about ₹2.5 lakh became nearly ₹17,500 cheaper. Standard non-solar pumps are taxed under their own heading. The invoice classification matters, solar pumps incorrectly billed as ordinary pumps lose the concessional rate.

Mounting structures (HSN 7308 / 7610), 18% when sold separately. Galvanised iron (GI) structures sold on their own fall under 7308 (structures of iron or steel) and aluminium structures under 7610, at 18%. Inside a complete solar system or a supply-and-install contract, the structure is part of the system value and follows the 5% rate or the 70:30 split. Our mounting structures range covers both GI and aluminium builds at this rate.

Cables, MCBs, switchgear (HSN 8536 / 8544), 18% when sold separately. DC cables, AC cables, Multimode Cable 4 (MC4) connectors, Miniature Circuit Breakers (MCBs), isolators, AC Distribution Board (ACDB), DC Distribution Board (DCDB), and surge protection devices bought on their own sit at 18% under their parent electrical-equipment HSNs. See our wires and cables product line for the BoS items billed at this rate.

PCB inverter parts (HSN 8534), 18%. Printed Circuit Board (PCB) assemblies, capacitors, and Insulated Gate Bipolar Transistor (IGBT) modules used in inverter manufacturing are 18%. Relevant for Original Equipment Manufacturers (OEMs) and large repair contracts, not for end users.

Solar EPC contracts, 70:30 split. Where a contractor supplies the solar system and installs it under one contract, 70% of the gross consideration is deemed to be goods at 5% and 30% is deemed to be services at 18%. This is where most invoicing errors happen, when contractors bill the whole contract at 5% (the module rate) the service portion is undertaxed and exposed at audit, and when they bill it all at 18% the buyer is overcharged. Services billed entirely separately from goods, such as O&M or AMC, carry 18%. A properly structured turnkey EPC contract itemises goods and services separately rather than bundling them under one HSN, which is exactly what avoids this reclassification risk.

Effective Rate on EPC Contracts, the 70:30 Split

The effective rate is what actually matters for budgeting. For a supply-and-install rooftop contract, it does not depend on the cost basket, because the 70:30 deemed split applies to the gross contract value. For a representative 5 kW residential EPC at ₹2,50,000 (excluding tax), the calculation looks like this:

Effective GST on the contract: ₹22,250 ÷ ₹2,50,000 = 8.9%. The same 8.9% applies to a commercial supply-and-install contract of any size. As a planning rule of thumb, use 8.9% for turnkey rooftop contracts, 5% for a complete system bought without installation, and 18% for separately purchased inverters, batteries and BoS items.

A persistent mistake is for vendors to issue the entire invoice at 18%. On a ₹2.5 lakh job, that error costs the homeowner about ₹22,750 in unrecoverable tax (residential buyers cannot claim ITC, so the overcharge is a real cash cost). For the equivalent commercial buyer, the overcharge gets recovered via ITC; the cash damage is zero but the documentation hassle is real. We covered the cheap-quote warning signs that often correlate with sloppy GST handling in red flags in a cheap solar quote.

Get a GST-compliant quote. Our team issues itemised invoices with the right HSN code on every line, residential PM Suryaghar or commercial captive plants alike. Get your free quote →

Residential 5 kW GST Calculation Example

Take a Jaipur homeowner installing a 5 kW grid-tied rooftop system. Quoted pre-tax cost is ₹2,50,000. They are an unregistered individual, no GSTIN, no ITC available. PM Suryaghar Central Financial Assistance (CFA) from the Ministry of New and Renewable Energy (MNRE) is a fixed per-kW amount, ₹30,000/kW for the first 2 kW and ₹18,000 for the third kW, capped at ₹78,000 for 3 kW and above, so it does not rise with the GST on the invoice. Modules must be domestically manufactured (DCR) to qualify.

For a residential buyer, every percentage point of blended GST converted into actual paid GST is real money. There is no way to recover it as ITC. The only protection is to check that the invoice applies the 70:30 split (or 5% on a supply-only system), and refuse a flat-18% invoice. The MNRE subsidy formula does not reimburse the GST, what the homeowner pays in tax stays paid.

For Jaipur-specific subsidy stacking and the JVVNL process around this invoice, our PM Suryaghar JVVNL process guide walks through the application paperwork. To estimate this for your own bill, use the Heaven Green solar calculator.

Commercial 100 kW GST + ITC Example

Now take a Jaipur-based manufacturing unit installing a 100 kW captive rooftop solar plant. Pre-tax EPC cost is ₹45,00,000. The unit is GST-registered, files Goods and Services Tax Return Form 3B (GSTR-3B) monthly, and has output GST liability on its product sales of around ₹8 lakh per month.

The GST paid on the solar capex is fully recoverable as ITC because the solar plant is a capital good used to supply taxable output (manufactured goods). Under Section 16 of the Central GST (CGST) Act and Rule 43 of the CGST Rules, capital goods ITC is claimed in full in the month of receipt of invoice, subject to the 180-day payment rule and the supplier being correctly registered.

On top of ITC, the commercial buyer also gets 40% accelerated depreciation (AD) on the pre-tax cost of the solar plant in Year 1 under the Income Tax Act, that’s a separate income-tax benefit, covered in our deep-dive on accelerated depreciation on solar tax savings. Stack ITC + AD and the post-tax payback on a commercial rooftop in 2026 falls under 4 years for most manufacturing buyers.

GST Changes Timeline, What Changed and What Stays

The main thing to check in 2026 is that quotes and invoices reflect the 22 September 2025 cut. A quote that still shows 12% on modules, or about 13.8% on a turnkey contract, is using the pre-cut rates. For up-to-date Council outcomes, the GST Council meeting minutes and the CBIC notifications page are the primary sources.

Common GST Misunderstandings

The same six mistakes show up across audits, invoices, and ITC reconciliations. Each one is preventable with a one-minute check before signing.

1. 1
   "Solar is exempt from GST." No solar component or service is GST-exempt. Modules and complete systems are concessional at 5%; separately sold components and standalone services are commonly 18%. The exemption confusion comes from the renewable-energy electricity charge exemption, that's tariff policy, not GST law.
2. 2
   Flat 18% on the entire EPC invoice. The most common residential overcharge. Insist on the 70:30 split for a supply-and-install contract: 70% at 5% and 30% at 18%. A flat 18% bill on a ₹2.5 lakh job costs the homeowner ~₹22,750 in unrecoverable tax.
3. 3
   Old 12% rate, or a single-line 5% on a turnkey job. A quote still showing 12% on modules uses the pre-22 September 2025 rate and overcharges you. At the other extreme, billing a supply-and-install contract entirely at 5% ignores the 30% service portion at 18% and fails GST audit, with the differential, interest and penalty demanded later. Commercial buyers should reject both formats.
4. 4
   Mounting structure at 5% when bought on its own. The 5% rate covers modules, cells and complete systems. A GI or aluminium structure bought separately is classified under 7308/7610 and commonly invoiced at 18%.
5. 5
   Standalone inverter at 5%. An inverter supplied inside a complete solar system follows the system rate, but an inverter bought on its own under heading 8504 can be argued at 18%. If a vendor bills a standalone inverter at 5%, ask for the basis in writing.
6. 6
   Missing the 180-day payment rule. Commercial buyers claim ITC in GSTR-3B but then fail to pay the EPC vendor within 180 days. The ITC has to be reversed with interest, and can be re-availed once you pay. Track invoice age every month against payment status.

Residential vs Commercial GST Treatment

The same GST law, two very different financial outcomes.

Verdict. GST policy in 2026 is structurally friendly to commercial solar, between ITC and accelerated depreciation, the post-tax economics of a commercial rooftop in Jaipur or Delhi sit at 35 to 40% Internal Rate of Return (IRR). It is structurally harsh on residential solar, every rupee of GST is a real cost the homeowner bears with no offset. The mitigation for residential buyers is purely procurement discipline: check the 70:30 split or 5% system rate, refuse flat-18% and old-12% invoices, and walk away from single-line “solar system” quotations. The mitigation for commercial buyers is bookkeeping discipline: match every vendor GSTR-1 monthly through the Invoice Management System, settle invoices inside 180 days, and capitalise the asset correctly to claim depreciation. Get either one wrong and the rate matrix above stops being a benefit and starts being a leak. Explore the asset side options through residential solar or commercial solar.

How Heaven Green Energy Bills GST Compliantly

We’ve been a GST-registered EPC company since 2018 and have completed over 10,000 installations across residential, commercial, and industrial segments. Our standard invoicing practice on every project, irrespective of size:

• Component-wise HSN split: each line carries its own HSN code, GST rate, and Central GST (CGST) / State GST (SGST) / IGST breakup. No flat-rate invoices.
• MNRE benchmark price on the panel line: for PM Suryaghar applications, the pre-GST module cost matches the MNRE benchmark so subsidy paperwork passes the first review.
• Verified GSTIN on every supplier: our procurement team validates each panel, inverter, and BoS vendor’s GSTIN on the GST portal monthly; ITC for commercial clients stays clean.
• E-invoice with Invoice Reference Number (IRN): every invoice above the ₹5 crore turnover threshold gets an Invoice Registration Portal (IRP) QR code; matches automatically into the buyer’s Invoice Management System.
• 180-day reminder system: commercial clients get an automated alert at day 150 of any unpaid invoice to protect their ITC claim.
• RCM advisories on inter-state contracts: if your project is in a different state from our billing GSTIN, we flag the IGST and RCM implications before purchase order issue.

Pick the service track that matches your project:

• Residential Solar: PM Suryaghar end-to-end with itemised GST invoicing.
• Commercial Solar: 10 to 500 kW captive plants with full ITC + accelerated depreciation structuring.
• Solar Calculator: savings, subsidy, and tax-inclusive payback for your specific bill.
• Contact our tax desk: a 30-minute call with our finance team to map your GST position before you sign any EPC contract.

For the practical buyer’s-side commentary on what to ask before signing, our GST on solar buyer’s guide is the matching companion to this rate-focused deep-dive.

Frequently Asked Questions

What is the GST rate on solar panels in India in 2026?

Solar photovoltaic cells and modules attract 5% GST under HSN code 8541 in 2026. The rate fell from 12% to 5% with effect from 22 September 2025, after the 56th GST Council meeting. It covers monocrystalline PERC, TOPCon bifacial, HJT, and thin-film panels regardless of wattage or brand. Complete solar power generating systems are also at 5%.

What is the GST rate on solar inverters in 2026?

It depends on how the inverter is supplied. An inverter supplied as part of a complete solar power generating system, or within a supply-and-install contract, follows the system treatment (5%, or the 70:30 split for a works contract). A string, central, or hybrid inverter bought on its own under HSN 8504, as a replacement or add-on, can be argued at 18%. If a vendor bills a standalone inverter at 5%, ask for the basis in writing.

What is the effective GST rate on a turnkey solar EPC contract?

A supply-and-install solar contract is a works contract, and GST uses the 70:30 deemed split: 70% of the contract value is taxed as goods at 5% and 30% as services at 18%. The effective rate is about 8.9% (3.5% + 5.4%). On a ₹2,50,000 rooftop contract that is ₹22,250 of GST. A flat-18% invoice on the same job would charge ₹45,000.

Can a residential homeowner claim ITC on solar GST under PM Suryaghar?

No. A residential homeowner is not registered under GST, does not file GSTR-3B, and cannot claim Input Tax Credit on solar GST. The full GST amount paid is a real cash cost added to the project. PM Suryaghar subsidy is a fixed per-kW amount, capped at ₹78,000, and does not reimburse the tax. The only protection for residential buyers is procurement discipline: check that a turnkey invoice applies the 70:30 split (about 8.9%), and refuse flat-18% or old-12% invoices.

Can a commercial business claim ITC on the GST paid on a captive solar plant?

Yes. A GST-registered commercial business that uses the solar plant for taxable business activities can claim full Input Tax Credit under Section 16 of the CGST Act. The solar plant qualifies as a capital good and ITC is claimed in GSTR-3B in the month the invoice is received, subject to the 180-day payment rule. ITC stacks with the 40% Year-1 accelerated depreciation under the Income Tax Act, making post-tax payback under 4 years for most manufacturing buyers.

What HSN code should be on a solar mounting structure invoice?

When a mounting structure is bought on its own, galvanised iron (GI) structures fall under HSN 7308 (structures and parts of structures of iron or steel) and aluminium structures under HSN 7610, commonly at 18% GST. When the structure is part of a complete solar system or a supply-and-install contract, it is included in the system value and follows the 5% rate or the 70:30 split rather than being billed separately.

What is the GST rate on solar batteries in 2026?

Lithium-ion and Lithium Ferro-Phosphate (LFP) batteries sold separately for solar Battery Energy Storage Systems are commonly invoiced at 18% GST under HSN 8507, and lead-acid batteries likewise. The September 2025 cut to 5% covered solar modules, cells and complete solar power generating systems, not separately sold batteries. This makes hybrid and off-grid solar systems more expensive after tax than grid-tied systems. Commercial buyers can recover this through ITC; residential buyers absorb it as cash cost.

Did the GST rate on solar change recently?

Yes. The 56th GST Council meeting on 3 September 2025 cut GST on renewable energy devices, including solar PV cells, modules and complete solar power generating systems, from 12% to 5% with effect from 22 September 2025. According to the PIB release, a typical 3 kW rooftop system became about ₹9,000 to ₹10,500 cheaper. The Invoice Management System is the most operationally relevant administrative change for commercial buyers reconciling ITC against vendor GSTR-1 filings. Monitor the GST Council meeting page for any updates.

Does the PM Suryaghar subsidy cover the GST component?

No. The PM Suryaghar Central Financial Assistance is a fixed amount, ₹30,000/kW for the first 2 kW and ₹18,000 for the third kW, capped at ₹78,000. The GST you pay is a separate cost borne by the homeowner. At the 8.9% effective rate on a turnkey contract, GST on a 3 kW system priced around ₹1.5 lakh to ₹1.8 lakh is roughly ₹13,000 to ₹16,000, not reimbursed. Budget the GST as an additional outlay.

What is Reverse Charge Mechanism for solar EPC and when does it apply?

Reverse Charge Mechanism (RCM) requires the buyer, not the supplier, to deposit GST directly to the government. It applies in solar EPC when an unregistered sub-contractor supplies installation services to a registered buyer, or when certain notified categories of inter-state services are involved. The buyer pays the RCM GST in cash, then claims it back as ITC the same month. For a commercial solar buyer, the net cash impact is nil, but the compliance work is real. Confirm with your EPC partner whether any line items fall under RCM before issuing the purchase order.