GST on solar is one of the most misquoted figures in the Indian solar market. Homeowners in Lucknow receive quotes charging 18% GST across the board. Others are told solar is tax-exempt. Neither is fully correct. The applicable rate for a complete residential rooftop solar system supplied and installed as a single contract is 12%, and knowing this protects you from overcharging. For businesses, understanding the GST structure unlocks input tax credit that can substantially reduce the effective cost of a commercial solar installation.
GST Rates on Solar Components in 2026
GST rates on solar apply at different levels depending on what is being supplied and how. Here are the applicable rates for the main components:
Complete Solar Rooftop System (Supply and Installation)
When an installer provides a solar rooftop system as a composite supply - meaning supply of panels, inverter, mounting hardware, cables, and installation labour under a single contract with a single price - the transaction is classified as a composite supply under GST law. The principal component of that supply (the solar system equipment) attracts 12% GST, and that rate applies to the entire contract value including labour. This is the correct rate for the vast majority of residential solar quotes in Kanpur, Lucknow, Raebareli, and across UP.
Individual Component Rates
Solar panels supplied as standalone goods: 12% GST (HSN code 8541). Solar inverters: 12% GST. Mounting structures made from galvanised steel supplied separately: 18% GST. Lithium-ion and lead-acid batteries: 18% GST. Solar water heaters (solar thermal systems, not photovoltaic): 0% GST, i.e., fully exempt. The distinction between solar PV (electricity-generating panels) and solar thermal (water heating) is important - they attract different rates and different subsidy structures.
Why Some Installers Charge 18 Percent on the Entire System
The 18% overcharge most commonly occurs in two situations. First, some smaller installers - particularly those without a full GST advisory setup - know that certain components like mounting structures and cables individually attract 18%, and they apply that rate uniformly across the whole invoice as a simplification. Second, some installers genuinely believe the composite supply classification does not apply to them, either because they have been incorrectly advised or because they have structured the contract as separate supply and service agreements.
The financial consequence is significant. On a Rs 3 lakh residential solar installation, the difference between 12% GST (Rs 36,000) and 18% GST (Rs 54,000) is Rs 18,000. That is roughly one additional month of savings being charged at the outset. On a Rs 8 lakh commercial system, the same difference amounts to Rs 48,000.
What to Check on Your Solar GST Invoice
When you receive a solar invoice, verify four things. One: the installer's GSTIN is printed on the invoice and is an active registration (verifiable at the GST portal). Two: the HSN code for solar panels is 8541 or the correct solar equipment code. Three: the GST rate on the line items is 12%, not 18%, for the system supply. Four: the total taxable value plus 12% GST adds up to the quoted final price. An invoice that shows 18% on the complete system or does not include a GSTIN is a red flag worth raising with the installer before payment.
How Businesses Can Claim GST Input Tax Credit
For GST-registered businesses in UP that install rooftop solar on commercial or industrial premises, the GST paid on the solar system purchase qualifies for Input Tax Credit (ITC). This is one of the least-utilised financial benefits of commercial solar in India.
ITC Calculation Example
Consider a manufacturing unit in Kanpur that installs a 30 kW commercial solar system for Rs 15 lakh. At 12% GST, the tax component is Rs 1.8 lakh. A GST-registered business can claim this Rs 1.8 lakh back by offsetting it against their GST output liability in their monthly GSTR-3B return. The Rs 1.8 lakh flows back within one to three billing cycles, effectively reducing the net cost of the solar system from Rs 15 lakh to Rs 13.2 lakh. For a business paying Rs 80,000-1,00,000 per month in GST output, this credit clears in two months.
Combining ITC with Accelerated Depreciation
The financial case for commercial solar strengthens further when ITC is combined with the 40% accelerated depreciation benefit available on solar energy equipment under the Income Tax Act. A GST-registered business in UP that claims both ITC (recovering the 12% GST) and accelerated depreciation in Year 1 effectively reduces its net solar investment by 45-55% in the first year alone, before accounting for a single unit of electricity savings.
This combination makes commercial solar particularly compelling for businesses in Lucknow's industrial areas, Kanpur's manufacturing sector, and agri-processing units across Hardoi and Sultanpur that pay significant electricity and income tax simultaneously.
ITC Eligibility Conditions
To claim ITC on a solar system purchase, the following conditions apply: the solar system must be used for business purposes; the installer must have correctly filed their GST returns so the invoice appears in your GSTR-2B (the auto-populated input credit ledger); and the claim must be made within the prescribed time limit from the invoice date. For mixed-use properties with both residential and commercial space, ITC is available only on the proportional area used for business.
PM Surya Ghar Subsidy and GST
A common question from homeowners in UP is whether the PM Surya Ghar subsidy amount is calculated before or after GST. The government benchmark cost used to determine subsidy eligibility is set inclusive of taxes - the benchmark already accounts for the 12% GST component. The subsidy of up to Rs 78,000 for a 3 kW system is disbursed directly to the buyer's bank account and is separate from the GST component on the installer's invoice. Homeowners do not claim ITC on residential installations (ITC is a business benefit), but they should still ensure the 12% rate is applied correctly since it affects the total amount paid.
At Sunwize, all invoices are GST-compliant with the correct rates, HSN codes, and GSTIN. We help customers review their invoice line items and, for commercial clients, coordinate with their finance teams to ensure the ITC claim is structured correctly from the outset.
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