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October 13, 2025

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Solar Panel HSN Code and GST Rates

In today's times, Solar energy has become a game changer for India. Solar panels have become an affordable and eco-friendly option between rising electricity bills and environmental pollution . The Indian government is promoting Green Energy through subsidies, incentives and tax benefits. But if you want to install solar panels, then it is very important to understand the GST (Goods and Services Tax) and the HSN ( Harmonized System Of Nomenclature) code. This will help you to make the right financial decisions, whether you are a business or an individual consumer.

What are Solar Panels and Why they Matter

A solar panel is a device that converts sunlight into electricity. This is made from PV (Photovoltaic) cells, which absorb sunlight directly and generate current. In India, solar panel demand is increasing every year. Solar panels have become an affordable and eco-friendly option.

Why do they matter?

If you use solar panels,then you will notice your electricity bill is decreasing.
It's also environmentally friendly with no carbon emissions.
The biggest benefit of using solar panels is long term cost saving.
Available government subsidy support.

In these running times, no matter whether it's small households or big Industries,solar panel demand is growing rapidly.

Understand the Solar Energy Devices & Systems

Solar energy is not only limited to the solar panel. In fact,there are so many devices and systems connected which are used for different purposes. All these devices help in harnessing renewable energy and also come under GST,where specific HSN codes are given for them.

Solar Investors:

The energy generated from solar panels is initially in DC (Direct Current) form.
The energy used in homes, offices,and Industries is mostly AC (Alternating Current)
That's why a solar inverter is an important device that converts DC and AC.
There are different categories, like grid-tied inverters , off-grid inverters and hybrid inverters.

Solar Water Heaters:

This is an eco-friendly heating device that uses solar radiation because of using electricity or LPG.
High demand in homes, hotels,hostels, and industrial plants.
From this, electricity consumption and monthly bills are both reduced.
The government has classified it as a renewable energy device where concessional GST rates are applicable.

Refer - Detail explanation about Water heater HSN code and GST rate.

Solar Lanterns and Solar Streetlight:

Solar Lanterns and solar street lights are an affordable and sustainable lighting solution for rural areas and remote villages.

Lanterns is a small portable device that comes with a battery and solar panel.
Solar streetlights are specially designed for public places, like parks, and highways.
This device plays a very important role in rural electrification and energy access.

Solar Rooftop Systems:

This is the most popular solar app which is used in homes , schools , hospitals and offices.

Rooftop solar systems generate electricity by directly capturing sunlight and are used for local consumption.
If extra electricity is generated, then it can be exported into the grid (net metering system).

Other Solar Devices:

Solar pumps - Solar pumps are used to draw water for agriculture.
Solar cookers - Directly use solar heat for cooking.
Solar Batteries - Solar batteries are used for storing generated power.

Overall ,there is only one objective for all devices - promotion of clean, green and renewable energy. And it also gives a specific HSN code under GST.

HSN Code for Solar Panels

HSN code means Harmonized System Of Nomenclature which is an international system to classify products. HSN code 8541 used for solar panels.

GST Applicability on Solar Panels and Equipment

GST applies to solar panels and related equipment like inverters, batteries, water heaters, lanterns etc. but their rates change from time to time.

GST Launched in 2017: 18% GST applied on solar inverters and 12% GST applied on panels.
2018-2020: Clarification comes for EPC (Engineering, Procurement and Construction) Contracts. If the complete solar system like panels, inverters,and accessories were kept in one bundle ,then 12% GST was levied on it.
2021-21st September 2025: Composite supply rules applied in which 12% was applied to the bundled solar system.
From 22nd September 2025 ( New GST Structure): Now, only 5% GST applies to renewable energy devices ( solar panels, inverters, lanterns, water heaters, lithium-ion batteries). Only GST on non- lithium batteries has been reduced from 28% to 18%.

Current GST Rates on Solar Panels & Components

Solar Products / Component	HSN Code	"Old GST Rates (Before 22nd September 2025)"	"New GST Rates ( From 22nd September 2025)"
Solar products / solar modules	8541	12%	5%
Solar inverters	8504	18%( standalone) / 12% ( bundled)	5%
Solar water heaters	841919	12%	5%
Solar Lanterns and street lights	9405	12%	5%
Lithium-ion batteries	8507	12%	5%
Other batteries ( non- lithium)	8507	12%	18%

GST on Installation Services (70:30 Rule)

When purchasing a solar panel system, it's not just the panels that come with it. In fact ,it also includes installation, wiring,and commissioning services . Under the GST, it's known as composite supply.

Under these 70:30 Rules follow:

70% of the contract value is known as goods ( solar panels, inverters, mounting structure) and 5% GST apply
30% contract value is known as service ( installation,testing, commissioning) and 18% GST apply.

Understand with an Example:

It means ,if one rooftop system's total cost is Rs 10 lakh then;

5 % GST applies on Rs 7 lakh =Rs 35,000
18% GST applies on Rs 3 lakh = Rs 54,000
Total GST= Rs 89,000 ( effective rate 8,9%)

This system is designed so that goods and services are taxed fairly,and the end consumer gets a transparent and reasonable cost structure.

Benefits of GST on Solar Panels

GST brings so much clarity and transparency in the solar industry. There are some major benefits.

Simplified Taxation:

Now, there is a single GST system before different taxes apply ( VAT, excise, service tax). After single GST compliance makes it easy .

Input Tax Credit (ITC):

Businesses and installers who pay GST can adjust components purchased from the output tax liability. For that final cost reduce.

Boost to Renewable Energy:

GST is indirectly pushing clean energy adoption, because the taxation uniform is more predictable now.

Competitive Pricing:

There is healthy competition between the manufacturers because of the standard rate.and the benefits which are received by the consumer in the form of better pricing.

Encouragement of Investment:

Investors confidently invest because of a predictable and clear tax framework.

Impact of GST on Prices and Industry Growth

Consumer:

Before 12% GST applied, but after changed GST rates,now only 5% GST is applied to solar panels and integrated systems.

Businesses:

The benefits of Input Tax Credit ITC are available now, in which tax burdens are reduced and costs can go with consumers.

Industry Growth:

Demand is steadily growing,with government subsidies and incentives further accelerating adoption.

18%-25% GST applied to the mounting structure and also batteries, overall little increase in system cost.

How to Claim GST ( Step by Step)

GST Registration- Business should be registered on the GST portal.
Proper Invoice- It is important to be GST compliant from the supplier ( HSN code mentioned).
File GST Returns - ITC has to be claimed by filing monthly and quarterly GST returns.
Input Tax Credit (ITC) use - Adjust the paid GST to output tax liability.
Consult Experts- Take the help of a CA/ tax consultant to avoid compliance errors.

Refer - GST rates & HSN code 8502 for electric generating sets.

Conclusion

Solar panels are a game changer technology for India, which supplies clean and affordable energy. GST has simplified taxation. Though the initial cost seems a bit high, people find the term benefits like subsidies, ITC and lower electricity bills attractive. If you are thinking about installing solar panels,then it is important to understand the GST and HSN code properly. So that,you can make an informed financial decision.

FAQs

1. What is the HSN code for solar panels in India?

HSN Code 8541 applied on solar panels. This is an international classification system,which makes GST compliance and product categorisation easy.

2. What is the GST rate on solar panels after September 2025 updates?

Before updation 12% GST rate was apply but After new GST rates updates on 22 September 2025 only 5 % GST applied on solar panels.

3. Can businesses claim GST on solar panel purchase?

Yes, businesses can claim Input Tax Credit (ITC) . It means GST you paid your panels, inverts or components. You can adjust from your output tax liability.

4. Is there GST on solar installation services?

Yes, on installation composite supply rule 70:30 is applied. It means on 70% goods only 5% GST applied and on 30% services only 18% GST applied. Effective rates is 8.9%

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