GST on solar is 5 percent. Most quotations still say 12

The GST Council cut the rate on solar equipment from 12 percent to 5 percent at its 56th meeting, effective 22 September 2025. Nearly a year on, quotation templates across the industry still carry the old arithmetic, and a surprising number of salespeople cannot explain the new one when a customer asks.

That is worth fixing, because the customer who asks is usually the customer who is about to compare you against two other quotes.

What changed, precisely

Solar photovoltaic cells under HSN 8541 40 11 and modules under HSN 8541 40 12 moved from 12 percent to 5 percent on 22 September 2025.

Rooftop installations are generally treated as solar power generating systems, and where the whole system is supplied as one package the 5 percent rate is the one that applies to the goods component.

That last clause is doing a lot of work, and it is where most of the confusion starts.

The number that matters is 8.9, not 5

An EPC contract is not a sale of panels. It is goods plus services, and it is usually valued under the 70:30 rule: 70 percent of contract value treated as goods, 30 percent treated as services.

Run it both ways.

Before 22 September 2025:

• 70 percent of value at 12 percent gives 8.4
• 30 percent of value at 18 percent gives 5.4
• Effective rate 13.8 percent

After:

• 70 percent of value at 5 percent gives 3.5
• 30 percent of value at 18 percent gives 5.4
• Effective rate 8.9 percent

The services half did not change. That is why the headline says the rate more than halved while your effective incidence fell by 4.9 percentage points, and it is the single most common thing EPCs get wrong when they explain this to a customer.

On a system quoted at Rs 2,00,000 before tax, the tax falls from Rs 27,600 to Rs 17,800. Trade estimates put the saving on a 3 kW residential rooftop at roughly Rs 9,000 to Rs 10,500, and at Rs 20 lakh to Rs 25 lakh on a 1 MW project, which is consistent with the same 4.9 point arithmetic.

The same cut is a different story to different customers

Here is the part that belongs in your sales training rather than your tax file.

For a residential customer, GST is a final cost. There is no input tax credit on a system installed for personal use. The 4.9 point reduction is real cash off their project and it is worth saying out loud, because most homeowners have no idea it happened.

For a commercial or industrial customer with a GSTIN, using the system for business purposes, GST is largely a timing question rather than a cost. They claim input tax credit, and the net GST cost of the installation trends toward zero within a return cycle.

This has a consequence people miss. If your C and I pitch leans on the GST cut as a headline saving, you are selling a benefit your buyer was already going to reclaim. Their finance head knows this and it makes the rest of your numbers look less considered. For that audience the tax point to make is about cash flow and about how the invoice is structured, not about a discount.

Two customers, one policy change, two completely different conversations. Getting that wrong is a small thing that reads as a large one.

What to change in the quotation itself

Four things, none of which take long:

• Show the rate as a line item, not a total. A quotation reading "inclusive of taxes" invites the customer to assume the worst, and it makes an honest comparison against a competitor impossible.
• Print the HSN codes. It costs a line and it signals to a procurement person that you know what you are doing.
• State the goods and services split if you are valuing on 70:30. If a customer's accountant queries the effective rate, the answer should already be on the page.
• For business customers, add an ITC note. One sentence saying the GST shown is creditable against their output liability, subject to their eligibility.

Why this is a proposal problem, not a pricing problem

The cut has been in force for nearly a year. It is not news, and no customer is going to sign because you mentioned it.

What they will notice is a proposal where the tax treatment is stated clearly, matches what their accountant expects, and does not have to be revised after the first phone call. That is the same reason a proposal built on a real generation model reads differently from one built on a per kW rule of thumb: not because any single number is dramatic, but because the whole document holds up when somebody checks it.

If you are also revisiting how subsidy appears on the same page, the PM Surya Ghar subsidy maths is the other number customers most often misread.

The short version

• Solar cells and modules moved from 12 percent to 5 percent on 22 September 2025, at the 56th GST Council meeting.
• Under the 70:30 valuation an EPC contract went from an effective 13.8 percent to 8.9 percent, a fall of 4.9 points.
• Treated as a works contract without bifurcation, the rate is 18 percent. Contract drafting decides this.
• Residential customers keep the saving. GSTIN customers reclaim it, so do not sell it to them as a discount.
• Show the rate, the HSN codes and the split on the quotation itself.

Sources

• Solar HSN codes and GST rates 2026 explained, Tally Solutions
• New GST on solar panel 2026: 5 percent rate on solar panels, Busy
• GST on solar in India: complete EPC guide to rates, ITC and HSN codes, Heaven Designs
• Two policy changes that are improving EPC margins right now, Reslink Energy