GST Council Cuts Tax on Renewable Energy Devices to 5%
- brg_news_room
- Dec 19, 2025
- 2 min read
INDIA: The Goods and Services Tax (GST) Council has cut the tax rate on renewable energy devices and their manufacturing components from 12% to 5%, with the revised rates coming into effect from September 22 this year.
To compensate state governments for potential revenue losses, the Council has simultaneously increased the GST on coal and lignite from 5% to 18%. In another key move aimed at supporting energy storage, the GST on non-lithium-ion batteries—including lead-acid, sodium, and flow batteries—has been reduced from 28% to 18%, while lithium-ion batteries will continue to attract an 18% GST. The measure is intended to accelerate the deployment of grid-scale energy storage solutions needed to support renewable power over longer durations.
Union Finance Minister Nirmala Sitharaman said the reduced 5% GST will apply to a wide range of renewable energy devices and parts, including biogas plants, windmills and wind-powered generators, waste-to-energy systems, solar PV cells and modules, solar cookers, and solar water heaters, among others.
The Council has also lowered GST on hydrogen fuel cell vehicles—such as cars, buses, and trucks—from 12% to 5%, while electric vehicles will continue to be taxed at 5%. Analysts noted that lower GST rates on clean energy technologies such as solar, wind, and batteries are likely to reduce project costs and improve the competitiveness of renewable power.
These changes form part of the GST 2.0 reforms, which have streamlined the tax structure largely into two slabs of 5% and 18%, replacing the earlier four-slab system. The simplified structure is expected to reduce consumer prices, boost demand, and support overall economic growth.
According to HSBC Global Investment Research, India is expected to commission 11.7 GW of thermal power, 3.8 GW of hydropower, and 36 GW of solar power capacity in FY26. Power demand has also remained strong, rising 4.4% year-on-year in August and more than 2% in July, aided by a low base.
Source: GST Council
