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India has lowered GST on renewable energy equipment from 12 percent to 5 percent, a step expected to reduce project costs and free up investment worth INR 1-1.5 lakh crore for adding the remaining 300 GW of renewable capacity by 2030. With 193 GW already installed, including 123 GW solar and 53 GW wind, the reform will make utility-scale and rooftop solar projects more affordable, benefit farmers under PM-KUSUM, and reduce procurement costs for DISCOMs. The policy is also expected to create jobs, support domestic manufacturing, and cut CO2 emissions significantly.
India has committed to installing 500 GW of renewable energy by 2030. By the end of August 2025, the installed capacity stood at about 193 GW, excluding large hydro projects. Out of this, nearly 123 GW came from solar energy and about 53 GW from wind. Achieving the target will require around 300 GW of additional capacity in the next few years, and even a cost reduction of 2-3 percent could release INR 1-1.5 lakh crore in investment capacity. Advertisement
Lower GST across the renewable value chain is expected to reduce project costs and improve tariff competitiveness. For example, a utility-scale solar project that normally costs INR 3.5-4 crore per MW will now save about INR 20-25 lakh per MW. At the level of a 500 MW solar park, this translates into project cost reductions of more than INR 100 crore. This will help improve the viability of large projects and support quicker rollouts.
The ministry also highlighted that the lower GST will bring down renewable tariffs, easing the cost burden for distribution companies (DISCOMs). Nationwide, this could mean annual savings of INR 2,000-3,000 crore in power procurement. Consumers are also expected to gain from greater access to affordable electricity, which will improve long-term sustainability in the power sector.
The GST cut will make rooftop solar systems more affordable for households. A typical 3 kW rooftop system will now cost INR 9,000-10,500 less, helping families adopt solar under the PM Surya Ghar: Muft Bijli Yojana. Farmers under the PM-KUSUM scheme are expected to benefit as well. A 5 HP solar pump priced at about INR 2.5 lakh will become cheaper by roughly INR 17,500. With 10 lakh such pumps planned, total savings for farmers could be around INR 1,750 crore.
Rural and underserved areas are likely to see gains through lower costs for decentralised renewable systems such as mini-grids, livelihood equipment, and solar water pumps. Shorter payback periods and improved returns will help schools, health centres, and small businesses adopt clean energy solutions, providing more reliable power.
The reform is also seen as a boost for domestic manufacturing. Module and component costs are expected to drop by 3?4 percent, improving the competitiveness of Indian-made renewable equipment. With India targeting 100 GW of solar manufacturing capacity by 2030, the policy change is likely to encourage investment into manufacturing hubs. It could also generate between 5-7 lakh direct and indirect jobs over the next decade, since every GW of manufacturing is estimated to create about 5,000 jobs.
Faster deployment of projects supported by the GST cut will also help reduce emissions. Each GW of solar capacity prevents around 1.3 million tonnes of CO2 emissions annually. The additional pace enabled by the reform could avoid 50-70 million tonnes of CO2 emissions every year by 2030.
The GST cut is scheduled to come into effect in the third week of September 2025. The decision is expected to directly benefit consumers, developers, farmers, and manufacturers, while also advancing India's climate goals under the Paris Agreement and its target of 500 GW of non-fossil fuel capacity by 2030.
Source PTI
5th Jun, 2025
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