GST Rate and HSN Code for Solar Panel Installation

If you’re looking at a solar quote in India right now, the tax line probably looks a bit strange. It’s not a flat 5%, 12%, or 18%. Instead, it’s a "blended" rate that usually settles around 8.9%. After 35 years in the electrical and solar industry, we’ve seen these tax laws shift more times than a summer monsoon, but the current "Composite Supply" rule is what every homeowner and business owner needs to understand before signing a contract.

Getting the solar panel installation hsn code and gst rate right isn't just for the accountants; it directly impacts your payback period. If your installer misclassifies the bill, you risk a tax notice or, worse, overpaying for your system.

The 70:30 Rule: How Solar System Taxation in India Actually Works

In the eyes of the Ministry of Finance, a solar installation isn't just a pile of hardware. It’s a "Composite Supply" of works contract. You aren't just buying panels; you’re buying a functional power plant that requires engineering, mounting, and commissioning.

To simplify this, the government mandated a specific split for billing. We treat 70% of the total project value as "Goods" (the hardware) and 30% as "Services" (the labor and engineering).

Tax Rate Breakdown: Goods (70%) vs Services (30%) Split

Note: For residential rooftop solar under the PM Surya Ghar Yojana, the blended rate most consumers see on their final invoice is approximately 8.9% due to recent concessional clarifications for residential goods.

Why the Blended Rate Matters for Your ROI

When we calculate your Solar ROI, the GST is a "dead cost" for residential users—you can't claim it back. However, for our commercial and industrial (C&I) clients, this GST is a pass-through. If you own a factory in Noida or Gurgaon, you can claim the full GST amount as an Input Tax Credit (ITC), effectively reducing your project cost by nearly 9-14% immediately.

Specific HSN Codes for Solar Modules and Inverters

Precision in solar equipment HSN codes is non-negotiable for a clean net metering application and subsidy claim. The HSN (Harmonized System of Nomenclature) code determines exactly which tax bracket a component falls into.

1. Solar PV Modules (HSN 8541)

Solar panels fall under HSN Code 8541 43 00. This category covers "Photovoltaic cells assembled in modules or made up into panels." Under current rules, these are taxed at 12%. If you see an installer quoting 5% GST on panels, they are using outdated 2021 data—be careful, as this will lead to issues during the PM Surya Ghar subsidy audit.

2. Solar Inverters (HSN 8504)

Inverters are technically "Static Converters" and fall under HSN 8504 40. While some stand-alone inverters are taxed at 18%, when they are part of a solar EPC billing component package, they are usually bundled into the 12% "goods" portion of the 70:30 split.

3. Solar Mounting Structures (HSN 7308)

The metal frames that hold your panels are often the most debated item. If sold alone, GI structures (Iron/Steel) carry 18% GST under HSN 7308. But as part of our standard installation structure, they are bundled into the composite solar contract.

3kW Rooftop Solar Installation Case Study | Panels, Inverter & Structure | Delhi

Solar EPC Billing Components: What’s in the Invoice?

When we issue a quote for Solar in Delhi, we break it down so there’s zero ambiguity for the DISCOM or the tax man. A typical high-quality installation includes:

• The DC Side: TOPCon Mono PERC panels, DC cables, and the module mounting structure.
• The AC Side: Solar Inverter, ACDB/DCDB boxes, and earthing kits.
• The Service Side: Site survey, structural stability certificate, DISCOM liaisoning for net metering in Delhi, and the actual physical labor.

We've seen fly-by-night installers try to bill panels at 12% and labor at 0% to "save" the customer money. This is a massive red flag. The 70:30 split was created by the GST Council specifically to stop this kind of tax evasion. Stick to the legal split to ensure your 25-year warranty remains valid and your subsidy is processed without queries.

Real Example: 5kW System in Rohini, Delhi

© BRIDGEWAY POWER

Let’s look at a real-world project we completed recently for a home in Rohini.

• System Size: 5 kW
• Total Project Value (Pre-tax): ₹3,15,000
• Goods Component (70%): ₹2,20,500
• Services Component (30%): ₹94,500

The Tax Calculation:

1. GST on Goods (12% of ₹2,20,500) = ₹26,460
2. GST on Services (18% of ₹94,500) = ₹17,010
3. Total GST Payable: ₹43,470
4. Final Invoice Value: ₹3,58,470

After the PM Surya Ghar subsidy of ₹78,000, the customer’s net out-of-pocket expense was significantly lower. You can run these exact numbers for your own roof using our Solar Calculator.

Impact of Tax Changes on Final Project ROI

In 2021, the GST on solar goods was raised from 5% to 12%. Many feared this would kill the industry. It didn't. Why? Because the efficiency of panels has skyrocketed. Modern 600Wp+ panels occupy less space and generate more power than the 335Wp panels used just a few years ago.

Even with an 8.9% effective tax rate, solar remains the best investment for any Indian household. With Delhi electricity rates hitting ₹8/unit in top slabs, a system that pays for itself in 3.5 to 4 years is a no-brainer. The tax is a one-time cost; the savings last 25 years.

If you are a business owner, the tax story is even better. Between the 40% Accelerated Depreciation and the GST Input Tax Credit, the government is essentially subsidizing nearly half your project cost. This is why Solar for MSMEs is currently our fastest-growing segment.

FAQ

What is the current GST rate on solar panels in 2026?

The stand-alone GST rate for solar PV modules is 12%. However, when purchased as part of a complete installation contract (EPC), a blended rate is applied based on a 70% goods and 30% services split, resulting in an effective rate of approximately 8.9% to 13.8% depending on the specific state and category.

Can I claim GST Input Tax Credit (ITC) on residential solar?

No, residential consumers cannot claim GST ITC. Only registered businesses with a valid GSTIN who use the solar power for business purposes (factory, office, warehouse) can claim the tax back. For homeowners, the GST is a part of the total project cost.

What is the HSN code for a solar inverter?

The HSN code for solar inverters is 8504. In a composite solar contract, it is treated as part of the 70% "goods" component and taxed at the applicable rate (currently 12% within the bundle).

Does the solar subsidy cover the GST amount?

The PM Surya Ghar subsidy is a fixed amount based on the kW capacity of your system (e.g., ₹78,000 for 3kW or higher). It does not scale with the GST you pay. Therefore, choosing an efficient installer who optimizes the system design is key to keeping your taxable base low.

What is the SAC code for solar installation services?

The Service Accounting Code (SAC) for solar installation is 9954, which covers "Construction services." This portion of the bill (30% of the total) is taxed at 18% GST.

Choosing the Right Partner

Tax laws are complicated, but your transition to green energy shouldn't be. At Bridgeway Power, we handle the technical design, the DISCOM paperwork for BSES Rajdhani or TPDDL, and the complex tax billing so you don't have to.

If you're tired of seeing high electricity bills and want a clear, honest breakdown of what solar would cost for your specific roof, Get a free quote today. We’ll send an engineer to your site—not a salesman—to give you the real math.