GST 2.0 reforms to boost India's clean energy match, with new push to solar and wind power

India’s renewable energy sector is poised for a significant boost following the government’s announcement to cut the Goods and Services Tax (GST) on solar and wind equipment. On September 3, the GST Council approved a reduction of the tax on solar photovoltaic modules and wind turbine generators from 12 per cent to 5 per cent, marking a key step in the nation’s broader strategy to accelerate clean energy adoption.

The measure forms part of a larger exercise in tax rationalisation affecting hundreds of consumer items, but its impact on renewable energy is expected to be especially transformative.

Lower costs, faster projects

News agency Reuters has quoted industry experts as saying that the GST cut will directly reduce the capital costs of solar and wind power projects by approximately 5 per cent. For developers yet to procure equipment, this translates into more competitive tariffs for electricity, benefitting both project viability and consumers.

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Sanjeev Aggarwal, founder and executive chairman of Hexa Climate Solutions, noted that the reduction will likely be passed on to end users, while developers who had already purchased equipment at higher tax rates can provide documentation to justify existing tariff agreements to the federal regulator.

Companies in the sector are already planning to leverage the tax cut. Solar equipment manufacturer Waaree Energies confirmed that the savings would be passed on to customers, while Oyster Renewable Energy indicated that developers could now re-engage with utilities at more competitive rates, potentially unblocking stalled projects.

The move is expected to accelerate India’s renewable capacity expansion, which currently has around 44 gigawatts (GW) of projects awaiting firm power supply agreements.

GST 2.0: Broader clean energy support

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The latest reforms, often referred to as GST 2.0, extend beyond solar and wind to include a wide array of renewable technologies. The GST rate has been lowered from 12 per cent to 5 per cent for fuel cell motor vehicles, including hydrogen-powered vehicles, as well as solar cookers, solar water heaters, bio-gas plants, waste-to-energy devices, solar lanterns and tidal energy equipment, the government release detailed.

The Union finance ministry emphasised that the move is aimed at promoting renewable energy goods and addressing structural issues like inverted duty structures.

Experts argue that these measures will strengthen India’s transition toward sustainable energy. Rohit Chandra, CEO of OMC Power, told news agency PTI that the reform would act as a catalyst for inclusive growth, rural empowerment and sustainable energy solutions and bolster the country’s economic and social fabric.

Similarly, Amit Paithankar, CEO of Waaree Energies Limited, stated that the reduction will accelerate capacity additions essential for meeting India’s clean energy targets.

Boosting competitiveness and investment

Analysts highlight that lower GST rates improve the financial viability of renewable energy projects, attracting both domestic and foreign investment. Ishver Dholakiya, founder of Goldi Solar, told PTI that the reform sends a strong signal to investors, while Simarpreet Singh, CEO of Hartek Group, noted that easing the financial burden on capital-intensive projects will encourage private participation and faster adoption nationwide.

Competitive tariffs resulting from lower capital costs will also enhance the sector’s attractiveness in upcoming auctions, according to Akshay Hiranandani, CEO of Serentica Renewables.

The broader vision aligns with India’s 2030 renewable energy targets and its 2070 net-zero goal. Srivatsan Iyer, global CEO of Hero Future Energies, emphasised that making clean technologies more affordable will accelerate adoption, strengthen energy independence, generate green jobs and bring the nation closer to a sustainable future.

A decisive policy

GST 2.0 reforms represent a decisive policy intervention designed to fast-track India’s transition to renewable energy. By cutting taxes on solar and wind equipment, alongside other green technologies, the government has lowered project costs, encouraged investment, and paved the way for more competitive tariffs.

These measures not only support India’s ambitious non-fossil fuel capacity target of 500 GW by 2030 but also signal the country’s commitment to building a cleaner, greener, and economically resilient energy future.