---
title: GST on Solar in India 2026: 5% Rate | Arrays Ingenieria
description: GST on solar modules is 5% since 22 September 2025. How the 70:30 rule puts EPC contracts near 8.9%, input tax credit and a worked example.
url: https://arraysingenieria.com/gst-on-solar-india/
last_updated: 2026-10-11
source: Arrays Ingenieria (Arrays Ingenieria Pvt. Ltd.)
---

Guide · Tax

# GST on Solar in India (2026): 5% on Equipment, About 8.9% on EPC Contracts

The GST Council cut GST on solar devices from 12% to 5% from 22 September 2025. How it applies to modules, inverters and full EPC contracts, what the 70:30 rule means, and how much a plant saves.

On this page

- What changed and when
- How GST works on a full EPC contract: the 70:30 rule
- Input tax credit: can your business claim the GST back?
- Worked example: what the cut saves on a Rs 1 crore plant
- Other taxes that affect a solar project
- Frequently asked questions
- Sources

By the [Arrays Ingenieria engineering team](https://arraysingenieria.com/about/) · Updated 11 Oct 2026 · 4 min read

**Key takeaways**

- GST on solar cells, modules and specified renewable-energy devices is **5%**, cut from 12% with effect from **22 September 2025**
- For a solar plant supplied with installation services, a deemed **70% goods : 30% services** split applies, which works out to about **8.9%** overall
- The Andhra Pradesh High Court (December 2025) upheld the 70:30 method for a solar EPC contract and set aside an 18% assessment
- A business using the plant for taxable supplies can usually claim input tax credit: confirm with your tax adviser
- On a Rs 1 crore plant the cut is worth roughly Rs 2.5 lakh to Rs 4.9 lakh, depending on how the contract is structured

## What changed and when

At its **56th meeting on 3 September 2025**, the GST Council cut the rate on solar cells, solar modules and other renewable-energy devices from **12% to 5%**, effective **22 September 2025**. It was part of a wider rate rationalisation, and for solar it reversed the increase from 5% to 12% made in 2021.

Because equipment is the largest part of what a solar plant costs, the cut flows almost directly into a lower project price and a shorter payback.

GST on common solar items after 22 September 2025

| Item | Typical HSN | GST rate |
| --- | --- | --- |
| Solar PV cells and modules | 8541 | 5% |
| Solar power generators and specified parts (as listed in the rate notification), such as grid-tie inverters for solar systems | 8501 / 8504 | 5% where covered by the solar-devices entry |
| Installation, civil and electrical services supplied on their own | 9954 / 9987 | 18% |
| Solar plant supplied with services (EPC), deemed split | Mixed | 70% at 5% + 30% at 18% = about 8.9% |

**Check the exact entry**

Whether a particular component (structures, cables, batteries, monitoring hardware) falls under the 5% solar-devices entry depends on the wording of the rate notification and how the item is supplied. Your supplier's invoice and your tax adviser should agree on the HSN.

## How GST works on a full EPC contract: the 70:30 rule

Most plants are bought as a package: modules, inverters, structures and cables plus the design, installation and commissioning. Since 2019 the GST rules have deemed such a supply of a solar power generating system with services to be **70% goods and 30% services**. The goods part is taxed at the solar rate and the services part at 18%.

Effective GST on a solar EPC contract under the 70:30 rule

| Period | Goods (70%) | Services (30%) | Effective rate |
| --- | --- | --- | --- |
| Before 1 Oct 2021 | 5% | 18% | 8.9% |
| 1 Oct 2021 to 21 Sep 2025 | 12% | 18% | 13.8% |
| From 22 Sep 2025 | 5% | 18% | 8.9% |

Tax officers have sometimes argued that a solar EPC contract is a works contract for immovable property taxable at 18% in full. In **December 2025 the Andhra Pradesh High Court**, in a case brought by a module maker and EPC company, held that the 70:30 formula applies to such a contract and directed the tax to be recomputed at about 8.9%. The judgment is binding only in that state, but it is persuasive elsewhere.

**Our practice**

We set out supply and services clearly in every CAPEX contract and invoice them in line with the applicable rule, so the tax treatment is transparent from the quotation onwards.

## Input tax credit: can your business claim the GST back?

A registered business that uses the solar plant in the course of making taxable supplies (a factory, a warehouse, a tea factory selling made tea) can generally claim input tax credit on the GST paid on the plant, treating it as a capital good. That makes the GST itself largely a cash-flow item rather than a cost.

Credit can be restricted where the power is used for exempt supplies, where the plant is treated as immovable property under your facts, or where the books treat it in a particular way. The rules are nuanced, so confirm the position for your business with your chartered accountant before you budget the project.

## Worked example: what the cut saves on a Rs 1 crore plant

Take a commercial plant whose pre-tax contract value is **Rs 1 crore**.

GST payable on a Rs 1 crore solar EPC contract (illustrative)

| Scenario | Rate applied | GST before the cut | GST after the cut | Saving |
| --- | --- | --- | --- | --- |
| EPC contract, 70:30 rule | 13.8% to 8.9% | Rs 13.8 lakh | Rs 8.9 lakh | Rs 4.9 lakh |
| Equipment only (installation billed separately) | 12% to 5% on Rs 70 lakh | Rs 8.4 lakh | Rs 3.5 lakh | Rs 4.9 lakh |
| Modules only (about 35-40% of cost) | 12% to 5% on Rs 37.5 lakh | Rs 4.5 lakh | Rs 1.9 lakh | Rs 2.6 lakh |

For a business that cannot claim input tax credit, the saving is a straight reduction in project cost. For one that can, it reduces the cash locked up until the credit is used. Either way, payback improves.

Want a quotation with the 5% rate and the 70:30 split shown line by line? Tell us about your site.

[Get a free solar quote](https://arraysingenieria.com/free-solar-quote/)

## Other taxes that affect a solar project

- **Customs duty** on imported cells and modules (see [solar import duty in 2026](https://arraysingenieria.com/solar-import-duty-india/)).
- **Accelerated depreciation** on the plant for a business owner (see [our depreciation guide](https://arraysingenieria.com/accelerated-depreciation-solar/)).
- **Electricity duty** on self-consumed power, which some states levy or waive for captive solar under their solar policies.
- **Open-access charges** if the plant is off-site (see [Green Energy Open Access](https://arraysingenieria.com/green-energy-open-access/)).

## Frequently asked questions

What is the GST rate on solar panels in 2026?

5%. The GST Council cut the rate on solar cells, modules and other specified renewable-energy devices from 12% to 5% with effect from 22 September 2025.

What is the GST on a solar EPC contract?

Where a solar power generating system is supplied with installation services, 70% of the value is treated as goods (5%) and 30% as services (18%), an effective rate of about 8.9%.

Is the 70:30 rule upheld by the courts?

In December 2025 the Andhra Pradesh High Court held that the 70:30 formula applies to a solar EPC contract and set aside an 18% assessment. It is binding in Andhra Pradesh and persuasive elsewhere.

Can my company claim input tax credit on a solar plant?

Usually yes, if the plant is used in making taxable supplies and is treated as a capital good in your books. Restrictions can apply, so confirm with your chartered accountant.

Does GST apply to O&M and module cleaning services?

Yes. Standalone services such as operation and maintenance or module cleaning are generally taxed at 18%.

## Sources

- [pv magazine India, 4 Sep 2025: GST on solar cells, modules cut to 5%](https://www.pv-magazine-india.com/2025/09/04/gst-on-solar-cells-modules-cut-to-5/)
- [Tally Solutions: Solar HSN codes and GST rates 2026](https://tallysolutions.com/gst/solar-hsn-code-gst-rate/)
- [Taxscan: GST on solar EPC contracts at 8.9% under the 70:30 formula (Andhra Pradesh High Court)](https://www.taxscan.in/top-stories/gst-on-solar-epc-contracts-to-be-levied-at-under-formula-andhra-pradesh-hc-sets-aside-assessment-1440012)

This guide explains public policy in plain language for planning purposes. Rules, rates and deadlines change: confirm the current position with the notifying authority, your DISCOM and your tax adviser before you commit. Last checked 11 Oct 2026.

**About the authors.** Arrays Ingenieria is an ex-servicemen-led solar EPC and installation & commissioning company working Pan-India, from Assam's tea estates to industrial rooftops. [Our story](https://arraysingenieria.com/ex-servicemen-led-msme/) · [Our projects](https://arraysingenieria.com/projects/)

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From Our Sites

## Case Studies on This Topic

Real plants our veteran-led crews have built, with the scope of work in detail.

[Tea Estate · Ground-Mount: **Jay Shree Tea: 1 MW Solar at Towkok & Manjushree Tea Estates**1035 kWp (535 + 500 kWp) · Sonari, Charaideo district, AssamRead the case study](https://arraysingenieria.com/project-jayshree-tea-1mw-solar-assam/)[Industrial · Rooftop: **Super Smelters: 1980.3 kWp Rooftop Solar Plant**1980.3 kWp (about 2 MW) · Jamuria (Asansol), West BengalRead the case study](https://arraysingenieria.com/project-super-smelters-1980kwp-rooftop-solar/)

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