India’s renewable energy sector is set to witness significant cost savings following the rationalisation of goods and services tax (GST) rates. The reform is expected to cut annual power procurement costs for distribution companies (discoms) by ₹2,000–₹3,000 crore, while reducing the price of rooftop solar systems for households by ₹9,000–₹10,500, according to the Ministry of New and Renewable Energy.

The GST Council’s decision to reduce rates from 12 per cent to 5 per cent across the renewable energy value chain will bring down the capital cost of utility-scale solar projects by ₹20 lakh–₹25 lakh per MW. At the scale of a 500-MW solar park, this translates into savings of more than ₹100 crore. The ministry stated that the move will improve tariff competitiveness, ease financial pressure on discoms, and create downstream benefits for consumers.

Under the PM Surya Ghar: Muft Bijli Yojana, the lower cost of rooftop solar systems is expected to accelerate adoption among families. Farmers under the PM-KUSUM scheme will also benefit, as a 5 HP solar pump will now be cheaper by ₹17,500. At the scale of 10 lakh pumps, this could deliver collective savings of ₹1,750 crore. Rural regions are likely to gain from reduced costs of mini-grids, solar water pumps, and other decentralised energy solutions.

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The ministry added that the rate cut will support domestic manufacturing, with module and component costs projected to fall by 3–4 per cent, spurring investment and job creation in solar manufacturing hubs.

The GST Council cleared the decision at its 56th meeting on September 3, with the revised rates taking effect from September 22. While the broader aim is to strengthen green growth and energy independence, the immediate impact lies in lowering costs for developers, households, and farmers alike.

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