GST Rates & HSN Codes for Solar and Renewable Energy Products

The renewable energy sector in India is growing at a rapid pace, with solar power leading this growth. Nowadays, more homes, businesses, and MSMEs have begun using cleaner energy sources than ever.

That’s why it is important to understand the GST rates on solar power-based devices, HSN codes, as well as the overall GST tax structure. This knowledge is particularly important for players in the EPC industry, manufacturers, traders, and installers of solar equipment.

This guide will provide you with all the necessary information relating to the GST framework for solar energy systems, HSN Code classification, and the process to obtain an inverted duty refund.

All about GST Structure of Solar Products.

The solar products fall under two broad categories of supplies under GST:

1. Individual Solar Components.
All the components (solar panel, inverter, battery, cable, etc.) have their individual HSN code and GST rate.

2. Complete Solar Power System (Composite Supply).
When a supplier offers a turnkey solar system, the project is taxed at a single effective rate.

The following is the straightforward rule:

• Individual components = 5% or 18%
• Total solar plant (EPC supply + installation) = 8.9% effective GST

GST Rates and HSN Codes of Solar Products.

After the GST 2.0 update, the following is the most precise and industry-validated breakdown of GST and HSN codes

Inverted Duty Structure (IDS) & GST Refund in Solar Products

The solar industry faces a clear Inverted Duty Structure (IDS) because key finished products like solar panels and solar inverters attract only 5% GST, while most inputs are taxed at 18%. This creates unused ITC that cannot be utilized, especially since solar electricity is exempt under GST.

To avoid working-capital blockage, eligible businesses can claim IDS GST Refund under Rule 89(5).

Example: How IDS Refund Arises

If a company buys inverter components at the price of ₹10,00,000 at 18% GST, it pays ₹1,80,000 ITC.

When the finished inverter is sold at 5% GST for ₹10,00,000, the output tax is only ₹50,000.

The remaining ₹1,30,000 becomes accumulated ITC, eligible for Inverted Duty Structure Refund.

Conclusion

The knowledge of the GST rates on solar power-generated devices, their HSN code, and the overall tax system is essential to manufacturers, EPC contractors, distributors, and MSMEs engaged in the development of clean energy in India. The government has maintained the GST at lower rates on modules and key solar units and subjected electronics and accessories to a high taxation slab.

Frequently Asked Questions (FAQs)

1. Give the  HSN number for solar energy?
The HSN number for Solar cells and solar modules is 8541.

2. Is renewable energy subject to GST?
Yes, the individual components attract 5-18 per cent GST. The effective GST of the composite supply of solar systems is 8.9%.

3. Do solar panels come with GST ITC?
Yes, fully available. Refund on excess ITC because of inverted tax is possible.