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The Goods and Services Tax (GST) on biogas plants and devices has been reduced from 12 percent to 5 percent, a step that is expected to make projects more viable and attract fresh investments. The GST Council, in its recent meeting, also decided to restructure the overall tax system by cutting rates on 375 items and reducing slabs from four to two. The Indian Biogas Association said the reduction in GST will bring down costs, encourage wider adoption, and could result in USD 4-5 billion of private investment in the compressed biogas sector by 2030.
The GST Council has decided to lower the Goods and Services Tax on biogas plants and devices from 12 percent to 5 percent. The change will come into effect later this month and is expected to make projects more affordable and attractive for private investors. Advertisement
The council, which brings together the Centre and state governments, also approved tax rate reductions on 375 items. At the same time, it cut down the number of GST slabs from four to two, introducing a 5 percent rate for most common-use goods and an 18 percent rate for all other items. This marks the biggest restructuring of GST since its launch in July 2017.
The Indian Biogas Association (IBA) said the 7 percent cut in GST would directly improve the returns of projects and could lead to a 4-5 percent rise in new investments in the near future. The association added that the wider impact on the industry's value chain would be even greater.
According to IBA estimates, the sector could attract between USD 4 billion and USD 5 billion in private investment by 2030. The tax cut also aligns with the government['s broader approach of easing costs for renewable energy sectors, such as wind, solar, and waste-to-energy. Together, these measures are expected to improve decentralised renewable energy access in rural areas.
The association pointed out that the lower GST rate would not only make biogas plants more affordable but would also support job creation in manufacturing, installation, and maintenance. Its president, AR Shukla, said the reform was a positive move, though he highlighted the need for a complete value chain study to understand its full impact. He further explained that inputs and subcomponents used in biogas plants still attract higher GST than finished equipment, which raises overall project costs. Addressing this issue would make projects more cost-effective and help in faster adoption.
With agriculture-based regions likely to benefit the most, the decision is expected to encourage wider adoption of biogas technology by providing a relatively low-cost and sustainable energy option from organic waste. The Indian Biogas Association, set up in 2011, represents industry stakeholders including developers, plant operators, technology providers, policymakers, and researchers, and has been actively working towards creating a stronger ecosystem for the sector.
Source PTI
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