GST cuts open the door for renewable energy growth

The GST rate rationalisation to 5% will lower the cost of clean energy projects, making electricity more affordable and benefiting a broad spectrum of users.

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In line with Prime Minister Narendra Modi's vision to make GST a truly "Good and Simple Tax" that strengthens every sector of the economy, the renewable energy sector has received a major impetus under the latest GST reforms approved by the GST Council in its 56th meeting held recently. The rationalisation of GST rates across the renewable energy value chain from 12 to 5 percent will bring down the cost of clean energy projects, making electricity more affordable and directly benefiting households, farmers, industries, and developers.

Utility-scale solar project

Considering the capital cost of a utility-scale solar project, which typically amounts to around ₹3.5-4 crore per MW, it will now see savings of ₹20-25 lakh per MW. At the scale of a 500 MW solar park, this translates into project cost reductions of over ₹100 crore, significantly improving tariff competitiveness. The relaxation in taxes will help reduce operational costs and enhance competitiveness in both domestic and export markets. This will make renewable power more attractive and increase the number of projects.