One of the most common questions ARIA Green Energy receives from C&I solar buyers is: what GST rate actually applies to my solar project? The answer depends on how the transaction is structured — and getting it right can save you several lakhs in tax costs on a large project.
The Current GST Framework for Solar (2026)
As of the Union Budget 2026, the GST landscape for solar equipment is as follows. Solar photovoltaic modules and panels attract 12% GST under HSN 8541.40. This is an increase from the earlier concessional 5% rate that applied to certain solar goods. However, the critical caveat is that the rate applicable to your transaction depends on how your purchase is structured.
EPC Contract vs Equipment Supply: The Critical Difference
The most important distinction for solar buyers is between a pure equipment supply contract and an EPC (Engineering, Procurement, Construction) contract. Under GST law, a composite supply — where goods and services are bundled inseparably, with goods as the principal component — attracts the GST rate applicable to the principal supply.
For a well-structured solar EPC contract where the equipment (panels, inverters, structures) forms the dominant value, the composite supply attracts 5% GST — significantly lower than if the contract were split into separate goods and services invoices. This is why your choice of EPC contractor and how they structure the contract matters enormously to your project economics.
Component-by-Component GST Rates
Understanding the rates on individual components helps you reconcile invoices and plan ITC claims:
| Component | HSN Code | GST Rate |
|---|---|---|
| Solar PV Modules/Panels | 8541.40 | 12% |
| Solar String/Central Inverters | 8504.40 | 12% |
| Mounting Structures (GI/MS) | 7308.90 | 18% |
| DC/AC Cables | 8544 | 18% |
| Battery Storage (LFP) | 8507.60 | 18% |
| EPC Contract (composite) | 9954 | 5% (if structured correctly) |
ITC Strategy for Businesses
GST-registered businesses can claim Input Tax Credit (ITC) on solar purchases used for business purposes. This is particularly valuable for manufacturers, traders, and service providers who have GST output liability. The ITC effectively reduces the net GST cost to near-zero for many businesses — making the quoted GST rate less impactful on overall project cost than it appears at first glance.
However, businesses that are partially exempt from GST (such as hospitals providing exempt medical services, or schools) face ITC restrictions and should factor the irrecoverable GST into their project financial models. ARIA Green Energy's proposals explicitly state the applicable GST structure and its impact on effective project cost.
What This Means for Your Project
For a 500 kW solar project with an indicative cost of ₹2.1 crore (excluding GST), the difference between a 5% EPC contract and a 12–18% equipment-supply contract can be ₹14 lakh to ₹27 lakh in GST. For a GST-registered manufacturer who can claim full ITC, this is recoverable — but the timing of ITC claim still affects your cash flow during project execution. For an exempt institution like a hospital, this GST cost is a real, irrecoverable expense that affects project economics.
Always ensure your EPC contractor provides a properly structured composite supply contract with clear HSN codes, quantities, and a justified GST rate — and verify this with your CA before executing the agreement.
Frequently Asked Questions
Ready to Take the Next Step?
Get a free solar assessment and proposal from ARIA Green Energy — no commitment required.