In a major boost to India’s clean energy sector, the GST Council on Wednesday announced a sharp cut in Goods and Services Tax (GST) on renewable energy equipment and manufacturing parts, reducing the rate from 12 per cent to 5 per cent, effective September 22.

The lower GST will apply to devices and components such as biogas plants, windmills, solar panels, solar cookers, water heaters, and waste-to-energy plants, Union Finance Minister Nirmala Sitharaman said after the Council meeting. She added that the move will make green technologies more affordable and competitive.

At the same time, the Council raised the GST on coal and lignite from 5 per cent to 18 per cent, a step aimed at offsetting revenue losses for state governments following the tax cuts in the renewable sector.

In another major decision, the GST on non-lithium-ion batteries — including lead acid, sodium, and flow batteries used for grid-scale storage — was reduced from 28 per cent to 18 per cent. The rate for lithium-ion batteries will remain unchanged at 18 per cent. Taxes on hydrogen-powered fuel cell vehicles have also been cut from 12 per cent to 5 per cent, while electric vehicles (EVs) will continue to attract 5 per cent GST.

Analysts noted that lowering tax rates on solar, wind, and energy storage technologies will significantly reduce project costs and accelerate India’s transition to renewable power. The latest reforms streamline GST into two primary slabs — 5 per cent and 18 per cent — replacing the earlier four-tier structure.

According to HSBC Global Investment Research, India is projected to add 36 GW of solar capacity in FY26, alongside 11.7 GW of thermal power and 3.8 GW of hydropower, highlighting the growing share of renewables in meeting the nation’s rising energy demand.