India Cuts GST on Renewable Energy Components to 5%, Raises Coal Levy to 18%

India’s Goods and Services Tax (GST) Council has announced a major policy shift, reducing the GST rate on renewable energy components from 12% to 5%, while increasing the GST on coal and lignite from 5% to 18%.

The new rates will take effect on 22 September 2025, covering a wide range of renewable energy products including solar power equipment, solar cookers and lamps, windmills and generators, waste-to-energy systems, biogas plants, and tidal or wave energy installations.

According to the Central Board of Indirect Taxes and Customs (CBIC), the revision is aimed at “promoting renewable energy goods in the country” and reducing India’s dependence on imported solar modules, particularly from China.

Calling the decision a “landmark judgment,” Sameer Gupta, chairman of independent power producer (IPP) Jakson Group, said the tax cut marks a critically important step in advancing India’s clean energy transition.

“The tax reduction on renewable energy equipment – including solar cells, silicon wafers, photovoltaic modules, windmills and biogas plants – will lower input costs for project development and module manufacturing, strengthen the economic viability of renewable projects, and make solar power more affordable for households, businesses, and farmers across the country,” Gupta noted.

The higher GST on coal underscores the government’s strategy to make renewable energy more competitive while discouraging fossil fuel reliance. Despite international trade headwinds, including U.S. tariffs of up to 50% on Indian solar products and investigations into antidumping (AD) and countervailing duties (CVD), India has achieved major milestones.

·In 2023, the country surpassed 100 GW of cumulative installed renewable energy capacity, making it the world’s fourth-largest PV market.

·By August 2025, India’s domestic solar module manufacturing capacity exceeded 100 GW, a dramatic rise from just 2.3 GW in 2014.

While India has rapidly scaled up solar module production, it continues to rely heavily on imported upstream components such as wafers and polysilicon. Policymakers expect the GST reform to attract further investment into domestic manufacturing, helping build a stronger ‘Made in India’ solar supply chain.