GST cut to save discoms ₹3,000 crore annually on power costs: MNRE

MNRE said reducing GST on renewable devices to 5% from 12% will save discoms Rs 2,000-3,000 crore annually, lower solar project costs and boost clean energy investment

The reduction in Goods and Services Tax (GST) is expected to lower levelised renewable energy tariffs, easing the financial burden of electricity procurement for distribution companies, the Ministry of New and Renewable Energy (MNRE) said on Tuesday.

 

“India could witness annual savings of Rs 2,000–3,000 crore in power procurement costs on account of the recent reduction of goods and services tax on renewable energy devices and components to 5 per cent from the earlier 12 per cent,” MNRE said in a statement.

 

End consumers will benefit from greater access to affordable clean electricity, reinforcing the long-term sustainability of India’s power sector, the statement added. The rationalisation of GST rates across the renewable energy value chain is also expected to reduce the cost of clean energy projects, including the government’s rooftop solar initiative.

 

 

The capital cost of a utility-scale solar project, typically around Rs 3.5–4 crore per megawatt (MW), will now see savings of Rs 20–25 lakh per MW. At the scale of a 500 MW solar park, project cost reductions of over Rs 100 crore are expected.

 

“Lower GST will enhance the competitiveness of Indian-made renewable energy equipment by reducing module and component costs by 3–4 per cent, supporting the Make in India and Aatmanirbhar Bharat initiatives,” MNRE said.

 

With India targeting 100 gigawatt (GW) of solar manufacturing capacity by 2030, the government expects that lower GST on cleaner energy will encourage fresh investment into domestic manufacturing hubs. “The GST cut will not only reduce the levelised cost of energy but also boost investor confidence, enabling faster signing of power purchase agreements and quicker project commissioning,” the ministry added.