Rooftop solar is becoming noticeably more affordable for Indian households, and a key government tax decision is a big reason why. A reduction in the Goods and Services Tax (GST) on solar equipment — from 12% down to 5% — has trimmed thousands of rupees off the cost of a typical home system, and the savings stack on top of existing subsidies.
What the government changed
The GST Council reduced the tax rate on solar power equipment from 12% to 5%, with the lower rate applying across the renewable value chain — solar modules, inverters and related components. Because the tax is charged on almost every part of a rooftop installation, a lower rate feeds directly into the final price a homeowner pays.
How much cheaper does it make solar?
The impact is measurable. Industry estimates put the saving on a typical 3 kW residential rooftop system at roughly ₹9,000–₹10,500. For larger installations the effect is far bigger — on the order of ₹20–₹25 lakh for a 1 MW project. Combined with steadily falling module prices, driven by expanded domestic manufacturing, the all-in cost per kilowatt has reached some of the lowest levels the Indian market has seen.
Why the government took the decision
The move is aimed at accelerating India’s clean-energy transition. Lower equipment costs reduce project costs for developers and help ease renewable power tariffs, while making home solar more attractive to first-time buyers. It also complements the government’s flagship PM Surya Ghar Muft Bijli Yojana, which is designed to put rooftop solar on millions of homes, and supports the wider push to build a competitive domestic solar-manufacturing base.
What it means for homeowners
For a household, the tax cut works alongside — not instead of — the central subsidy. Under PM Surya Ghar, systems of 3 kW and above qualify for a subsidy of up to ₹78,000, and the GST reduction lowers the base price before that subsidy is applied. The result is a meaningfully lower net cost and a shorter payback period on your investment.
One point to check with your installer: from June 2026, government-linked and PM Surya Ghar projects must use modules built with cells from approved ALMM List-II manufacturers, which can affect which panels are eligible for the subsidy.
The bottom line
Between the GST cut, generous central subsidies and falling panel prices, there has rarely been a better time for Indian homeowners to consider rooftop solar. If you’re weighing it up, compare quotes from verified installers in your city to see exactly what a system would cost for your roof and electricity bill.