GST Applicability & Tax Rates on Renewable Energy Equipment
GST Applicability & Tax Rates on Renewable Energy Equipment ⚡
India's push for clean and green energy has significantly increased the demand for renewable energy equipment such as solar panels, wind turbines, and related components. But with growing adoption comes the need to understand the GST (Goods and Services Tax) structure on such products.
🧾 What is GST?
GST is a comprehensive indirect tax levied on the supply of goods and services across India. Introduced in 2017, GST replaced multiple taxes to create a single unified tax system.
☀️ Renewable Energy Equipment Covered Under GST
Some of the commonly used renewable energy equipment include:
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🔋 Solar panels
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🌀 Wind turbines
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⚙️ Solar invertors and batteries
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🏗️ Mounting structures
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🧰 Controllers, transformers, and other project components
📊 GST Applicability on Renewable Energy Equipment
🔹 Earlier Structure (before Jan 2019):
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5% GST on most renewable energy devices under Entry 234 of Notification No. 1/2017 – Central Tax (Rate).
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70:30 Ratio: 70% of the project cost treated as goods (taxed at 5%), 30% as services (taxed at 18%).
🔹 Revised Structure (from Jan 2019):
💡 Examples of GST Rates on Equipment
| Equipment | GST Rate |
|---|
| Solar PV Modules | 5% |
| Solar Power Generating Systems | 5% (Goods) |
| Inverters / Controllers | 5% |
| Batteries (Standalone) | 18% |
| EPC Contracts (Supply + Service) | 70:30 split (5% on 70%, 18% on 30%) |
🔍 Key Points to Consider
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✅ Composite supply contracts attract the blended rate based on the 70:30 formula.
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📜 Proper documentation and contract bifurcation is essential to avoid GST disputes.
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🏢 Businesses installing solar systems can claim input tax credit for eligible goods and services.
📌 Conclusion
The Indian government’s favorable GST structure on renewable energy equipment is designed to support the nation’s goal of achieving Net Zero emissions. The 5% concessional rate on solar and wind equipment, combined with a rational formula for composite supplies, makes renewable energy projects financially viable and tax-efficient.
Created & Posted by Twinkle Jha
Operations Head at TAXAJ
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