GST on Solar Panels in 2026: Rates on Modules, Inverters and Installation, the 70:30 Rule and ITC

If you're pricing a rooftop solar system for your home or a plant for your factory, GST is now one of the smaller lines on the quote — but it's also the line most vendors explain badly. This guide is for homeowners, businesses and solar installers who want the exact numbers: the GST rate on panels, inverters and batteries after GST 2.0, how the 70:30 rule taxes a supply-and-install contract, how GST sits alongside the PM Surya Ghar subsidy, when a business can claim input tax credit, and worked ₹ invoices you can match against your own quote. Every rate was checked against the GST rate notification effective 22 September 2025 in October 2026.

Quick answer

Solar panels, solar power generators and other solar power-based devices attract 5% GST from 22 September 2025 (they were 12% before GST 2.0). When one vendor supplies and installs the system, 70% of the price is taxed at 5% and 30% at 18%, an effective rate of about 8.9%.

• Standalone installation, civil work or AMC by a separate contractor: 18%

• Inverter as part of a solar system: generally 5%; sold as a general power converter: 18%

• Lithium-ion or lead-acid batteries sold on their own: 18%

• Homes pay GST on the full price; the PM Surya Ghar subsidy (up to ₹78,000) arrives later and doesn't change it

GST rate on solar panels and equipment after GST 2.0

Solar equipment gets its concessional rate from a single entry in the goods rate notification — entry 437 of Schedule I in the GST 2.0 schedules, which covers "renewable energy devices and parts for their manufacture" falling in Chapters 84, 85 or 94. The list includes solar power-based devices, solar power generators, solar lanterns and lamps, and photovoltaic cells "whether or not assembled in modules or made up into panels". The 56th GST Council recommended cutting this entry from 12% to 5%, and the new rate applies from 22 September 2025.

GST on solar items (2026)

Item	HSN	GST rate	Notes
Solar PV modules / panels	8541 43	5%	Cells and modules, mono or poly, any wattage
Solar power generator / complete system	84, 85 or 94	5%	When sold as goods without services
Solar inverter (as part of a solar system)	8504	5%	Generally accepted; see inverter section
General inverter / UPS sold standalone	8504	18%	Not a solar device
Batteries (lithium-ion, lead-acid) sold standalone	8507	18%	Grey area inside a solar package
Solar water heater and system	8419 12	5%	Separate entry
Solar lantern / solar lamp	94	5%	Listed by name
Installation, civil work, AMC by a separate contractor	SAC 9954 / 9987	18%	Services only
Supply + installation by one vendor	—	70% at 5% + 30% at 18%	≈ 8.9% effective

Solar PV modules / panels

HSN

8541 43

GST rate

5%

Notes

Cells and modules, mono or poly, any wattage

Solar power generator / complete system

HSN

84, 85 or 94

GST rate

5%

Notes

When sold as goods without services

Solar inverter (as part of a solar system)

HSN

8504

GST rate

5%

Notes

Generally accepted; see inverter section

General inverter / UPS sold standalone

HSN

8504

GST rate

18%

Notes

Not a solar device

Batteries (lithium-ion, lead-acid) sold standalone

HSN

8507

GST rate

18%

Notes

Grey area inside a solar package

Solar water heater and system

HSN

8419 12

GST rate

5%

Notes

Separate entry

Solar lantern / solar lamp

HSN

94

GST rate

5%

Notes

Listed by name

Installation, civil work, AMC by a separate contractor

HSN

SAC 9954 / 9987

GST rate

18%

Notes

Services only

Supply + installation by one vendor

HSN

—

GST rate

70% at 5% + 30% at 18%

Notes

≈ 8.9% effective

"Parts for their manufacture" matters for manufacturers and EPC contractors. Cells bought to make modules, and components bought to build a solar power generator, can be billed at 5% when they're supplied for that purpose. A generic part — a length of cable or a standard MCB sold over the counter — doesn't become a solar part just because it might end up on a roof; it keeps its own rate, which is usually 18%. For how the code is chosen, see our HSN code guide.

The 70:30 rule for supply-and-install contracts

Very few buyers purchase panels in a box. Most sign a turnkey or EPC contract — design, panels, inverter, mounting structure, wiring, installation and commissioning for one price. Before 2019 that created endless disputes: was it a composite supply of goods at the lower rate, a works contract at 18%, or something in between? The GST Council settled it in December 2018 with a deemed valuation rule, effective 1 January 2019, and CBIC later applied the same mechanism back to July 2017 for pending cases through Circular 163/19/2021-GST.

The rule now sits as an Explanation under entry 437. Where the solar goods are supplied by a supplier along with other goods and a taxable service, the value of the goods is deemed to be 70% of the gross consideration for all those supplies, and the remaining 30% is deemed to be the value of the service. The goods portion takes 5%; the service portion takes 18%.

The effective rate after GST 2.0 works out as:

• 70% × 5% = 3.5%
• 30% × 18% = 5.4%
• Total = 8.9% of the contract price

Under the old 12% rate the same contract carried 70% × 12% + 30% × 18% = 13.8%, so the cut saves almost five percentage points on every turnkey quote.

Three practical points follow from the wording. First, the split is deemed, not negotiated — a vendor can't put 90% down as goods to lower your GST, and an invoice that does so is wrong. Second, it applies only when the same supplier provides the goods and the service together. If you buy panels from a distributor and hire a separate electrician, each invoice carries its own rate (5% on panels, 18% on the labour). Third, the 30% covers all other elements of the contract, including the mounting structure, cables and civil work, so a vendor shouldn't then add a separate 18% line for those within the same contract.

How a turnkey solar invoice is taxed

Step 1

Total contract price

Step 2

70% deemed goods

taxed at 5%

Step 3

30% deemed services

taxed at 18%

Step 4

≈ 8.9% GST overall

CGST+SGST or IGST

Worked examples: GST on solar invoices

Example 1 — a 3 kW home system in Pune under PM Surya Ghar. The registered vendor quotes ₹1,80,000 before tax for supply and installation.

The vendor is in Maharashtra and so is the house, so the ₹16,020 shows as ₹8,010 CGST and ₹8,010 SGST. After commissioning and DISCOM inspection, the central subsidy of ₹78,000 reaches the owner's bank account, taking the net cost to ₹1,18,020. At the old 12% rate the GST would have been ₹24,840, so GST 2.0 saves this household ₹8,820.

Example 2 — a 50 kW rooftop plant on a factory in Coimbatore. The EPC price is ₹22,00,000 and the contractor is based in Karnataka, so IGST applies.

• Goods: 70% = ₹15,40,000 × 5% = ₹77,000
• Services: 30% = ₹6,60,000 × 18% = ₹1,18,800
• Total IGST: ₹1,95,800 (8.9%); invoice ₹23,95,800

If the factory uses the power for its own taxable manufacturing, it can claim the ₹1,95,800 as input tax credit (see the ITC section below), so GST is not a real cost. It shows up only as cash flow for a month or two.

Example 3 — buying parts separately. A small installer buys 10 panels from a distributor for ₹1,00,000 and charges a customer ₹20,000 for labour only, with the customer buying the panels directly from the distributor. The distributor bills ₹5,000 GST at 5%; the installer bills ₹3,600 GST at 18%. Total GST is ₹8,600 on ₹1,20,000 — 7.2%. That's lower than 8.9% because the labour share here is only 17%, not the deemed 30%. Splitting genuinely separate supplies like this is legitimate; relabelling one turnkey contract as two invoices from the same vendor is not, and an officer can treat it as a single supply.

Run your own quote through the calculator — use 8.9 as the rate for a turnkey contract.

Try it — GST on a turnkey solar quote

Sales (Add GST)Purchase (Remove GST)Price Comparison

AmountGST Rate

0%3% (Gold / silver)5%18% (Standard)40% (Sin / luxury)

Transaction Type

Intra-state (CGST + SGST)Inter-state (IGST)

Base Amount (Before GST)₹1,80,000.00

CGST (4.45%)₹8,010.00

SGST (4.45%)₹8,010.00

Total GST (8.9%)₹16,020.00

Total Amount (Including GST)₹1,96,020.00

Open the full GST Calculator (PDF, save, compare)

Inverters, batteries and other components

Inverters. Inverters are static converters under heading 8504, which sits in the 18% schedule. The question has always been whether a solar inverter — which converts the panels' DC output to AC — is a "part" of a solar power generator under the 5% entry. In 2026 the Karnataka High Court, in ABB India Ltd v Joint Commissioner (WP 9686/2025), held that it is: a solar inverter is an essential part of a solar power generating system and attracts the concessional rate, and Circular 163/19/2021-GST dealt only with EPC valuation, not eligibility. The ruling quashed demands of over ₹120 crore. It's a single-judge decision in one state and may be appealed, so the cautious practice is: bill at 5% when the inverter is a grid-tie or hybrid solar inverter supplied for a solar system and described that way on the invoice; bill at 18% when it's a home UPS or general-purpose inverter.

Batteries. Accumulators under heading 8507 — including lithium-ion and lead-acid batteries — are 18%. When a battery is part of an off-grid or hybrid solar package from one vendor, some sellers treat the whole package as a solar power generator at 5%, and the Uttarakhand Authority for Advance Ruling accepted that view for one applicant. Advance rulings bind only the applicant, so a vendor billing batteries inside a solar package at 5% should hold its own ruling or legal opinion. Battery replacements bought later are always at 18%. Our GST on batteries guide covers the rest of heading 8507.

Mounting structures, cables and balance of system. Supplied inside a turnkey contract, they fall within the 70:30 split. Bought separately — galvanised steel structures under 7308, cables under 8544 — they carry 18% unless the supplier can show they are parts made for a solar power generator.

Solar water heaters and pumps. Solar water heaters have their own entry at 5%. Solar water pumps supplied as solar power-based devices also fall in the 5% entry; farmers buying under PM-KUSUM are covered in our solar panel subsidy guide.

GST and the PM Surya Ghar subsidy for homes

For households, GST and the subsidy work independently. Under PM Surya Ghar: Muft Bijli Yojana, the Centre pays ₹30,000 per kW for the first 2 kW and ₹18,000 per kW for the third kW, capped at ₹78,000. These amounts are fixed per kW — they're not a percentage of the invoice — so neither a higher price nor GST changes them.

Home solar — subsidy vs GST (2026)

₹78,000

Maximum central subsidy

3 kW and above

≈ 8.9%

Effective GST on a turnkey quote

70% at 5% + 30% at 18%

₹16,020

GST on a ₹1.8 lakh 3 kW system

was ₹24,840 at 12%

The order of events explains why GST is charged on the full price. You choose a registered vendor on the national portal, agree the price, and the vendor installs the system and issues a tax invoice with GST on the full contract value. The DISCOM installs the net meter and inspects; only then is the subsidy released to your own bank account (or your loan account if you financed through the portal). The vendor never receives the subsidy, so there's nothing to deduct from the taxable value.

Two things to check on a PM Surya Ghar invoice: that GST is calculated at the 70:30 split (about 8.9% of the base price), not at a flat 12% or 18% left over from old billing templates; and that the system capacity on the invoice matches the capacity uploaded to the portal, since the subsidy is paid on the capacity actually installed. Housing societies claiming ₹18,000 per kW for common-area plants pay GST the same way.

Input tax credit on solar plants for businesses

For a GST-registered business, the real question isn't the rate but whether the GST comes back as credit. Three rules decide it.

Blocked credits don't usually bite. Section 17(5)(c) and (d) of the CGST Act block credit on works contracts and on goods and services used to construct immovable property — but both clauses exclude plant and machinery, defined as apparatus, equipment and machinery fixed to earth by foundation or structural support and used to make outward supplies. A rooftop or ground-mounted solar plant feeding your factory, shop or office is equipment on a structural support used in your business, so credit is normally available. Civil works that become part of the building itself (land, the building, other civil structures) remain excluded.

The power must serve taxable supplies. Credit follows use. A factory making taxable goods gets full credit. A hospital or school whose output is exempt doesn't. A business with mixed taxable and exempt supplies reverses a share under Rules 42 and 43 — for a solar plant, which is a capital good, the reversal is spread over five years.

Selling surplus power is an exempt supply. Electrical energy is exempt from GST. If your plant exports surplus units to the DISCOM and you're paid for them, that sale is an exempt outward supply, and the share of the plant's credit attributable to it may need reversing. Where net metering only offsets your own consumption, the exported share is usually small; where you run the plant mainly to sell power, the credit may be largely lost. Rulings have gone different ways on large plants, so take your CA's view before you claim credit on a big project. Our input tax credit guide explains Rules 42 and 43.

Common GST mistakes on solar quotes

Check your solar invoice

0/6

• Invoice dated on or after 22 September 2025 shows 5% on the goods portion
• Turnkey contract split 70:30, not a custom ratio
• IGST if the vendor is in another state; CGST + SGST if in your state
• Inverter described as a solar inverter if billed at 5%
• Capacity on the invoice matches the capacity on the PM Surya Ghar portal
• Vendor's GSTIN is active (check on gst.gov.in)

Share Print

Missing e-way bill on deliveries. Panels and inverters moved by road in a consignment worth more than ₹50,000 need an e-way bill, generated by the vendor or transporter. For a turnkey contract the e-way bill covers the goods being moved, valued at their invoice or delivery-challan value — not the deemed 70% figure. A truck of modules stopped without one can be detained, which delays the installation more than it costs in penalty. Larger vendors above the e-invoice threshold of ₹5 crore must also generate an IRN for every B2B invoice, so a factory buyer should check that the invoice carries a QR code before claiming credit.

Old rates on new invoices. Some vendors' billing templates still apply 12% on goods or 13.8% overall. Any invoice dated on or after 22 September 2025 should show 5% on the goods portion.

Wrong place-of-supply tax. A vendor in one state installing in another should charge IGST, not CGST and SGST. A wrong split means the buyer's credit appears under the wrong head and has to be fixed by the vendor.

Inflating the goods share. A 90:10 or 100:0 split on a turnkey contract understates tax. The buyer may lose credit on audit if the vendor's tax is reassessed, and a household loses nothing now but may face a vendor's recovery claim later.

Separate "installation" invoice inside a turnkey deal. If the same vendor issues a 5% invoice for the whole system and a second 18% invoice for "installation", the deemed 30% has been double-counted or the 70:30 rule has been bypassed. Ask for one contract and one invoice at the deemed split.

Batteries at 5% without support. Unless the vendor has a ruling or a clear legal basis, expect batteries sold separately at 18%.

Official links

• GST rates for goods (CBIC)Rate notifications, including Notification 9/2025-CT(Rate)
• 56th GST Council recommendations (PIB)Renewable energy devices cut from 12% to 5%
• CGST Act section 17Blocked credits and plant and machinery
• PM Surya Ghar national portalApply, choose a registered vendor, track subsidy

What to do next

Before you sign, ask the vendor to show the 70:30 split on the quote, the HSN on each item and whether IGST or CGST plus SGST applies. Households should then read our solar panel subsidy guide for the subsidy steps; businesses can test the payback with our ROI calculator and finance it with the EMI calculator.

This is general information, not legal or tax advice — confirm on the official source or with a professional.

Frequently asked questions

What is the GST rate on solar panels in 2026?

Solar panels — photovoltaic cells whether or not assembled into modules — attract 5% GST from 22 September 2025, down from 12% before GST 2.0. The same 5% applies to solar power generators, solar power-based devices, solar lanterns and parts used to make them. Solar water heaters are also 5%.

What is the 70:30 rule for GST on solar installation?

When one supplier provides the solar equipment together with installation or other taxable services, the rate notification deems 70% of the total price to be goods taxed at 5% and the remaining 30% to be services taxed at 18%. The effective GST on a turnkey contract is therefore about 8.9% of the contract price.

What is the GST on a solar inverter?

An inverter supplied as part of a solar power system is generally billed at 5%, and the Karnataka High Court held in 2026 that solar inverters are parts of solar power generating systems. An inverter sold as a general power converter or home UPS under heading 8504 is 18%. Ask the vendor to describe the inverter as a solar inverter on the invoice.

Is GST charged before or after the PM Surya Ghar subsidy?

Before. The vendor charges GST on the full contract price, and the central subsidy — up to ₹78,000 for a home — is paid into your bank account after the DISCOM inspects the system. The subsidy is a fixed amount per kW, so it doesn't change with the GST, and it doesn't reduce the GST you pay on the invoice.

Can a business claim ITC on a rooftop solar plant?

Usually yes. Section 17(5) blocks credit on works contracts for immovable property, but it excludes plant and machinery — equipment fixed by a foundation or structural support and used to make taxable supplies. A rooftop plant powering a factory or shop normally qualifies. If part of the power is sold to the grid as exempt electricity, a proportionate reversal may apply.

What is the HSN code for solar panels?

Solar cells and modules fall under heading 8541 — photovoltaic cells assembled in modules or made up into panels are 8541 43. For GST, they're covered by the renewable-energy entry that spans Chapters 84, 85 and 94, which gives them the 5% rate. Grid-tie inverters are 8504 and lithium-ion batteries 8507.

Sources & verification

Figures on this page were checked against the sources below when it was last reviewed on 9 October 2026. Each rate and limit is stored once with its own official source and review date, and official update channels are monitored daily so changes are picked up. How we verify

1. 1.Notification No. 9/2025 – State Tax (Rate), Maharashtra (mirrors central Notification 9/2025-CT(Rate)) — Government of Maharashtra · accessed 9 October 2026
2. 2.Recommendations of the 56th GST Council meeting (PIB press release) — GST Council / PIB · accessed 9 October 2026
3. 3.CGST Act, 2017 — Section 17 (blocked credits; definition of plant and machinery) — CBIC · accessed 9 October 2026
4. 4.PM Surya Ghar: Muft Bijli Yojana national portal — Ministry of New and Renewable Energy · accessed 9 October 2026
5. 5.Karnataka HC: solar inverters eligible for 5% concessional GST (ABB India Ltd v Joint Commissioner, WP 9686/2025) — SAG Infotech · accessed 9 October 2026
6. 6.Karnataka High Court rules solar inverters attract 5% GST and not 18% — Mercom India · accessed 9 October 2026
7. 7.GST Council recommends 5% GST rate for 70% of solar project cost — Mercom India · accessed 9 October 2026
8. 8.Uttarakhand AAR: solar components as composite supply — Mercom India · accessed 9 October 2026