New Tax Cuts To Accelerate India’s Shift To Solar, Wind Energy

India’s decision this week to slash taxes on solar and wind equipment will lower costs for new plants and, in turn, help accelerate the country’s shift to renewable energy, industry experts say.

India is Asia’s second-largest renewable energy market after China, having added 27.9 GW of capacity in 2024 and 29.5 GW in January–July 2025, according to Barclays.

The Narendra Modi government’s decision to cut the goods and services tax (GST) on solar photovoltaic modules and wind turbine generators to 5% from 12% — as part of broader tax cuts on hundreds of consumer items — will only further India’s renewables push.

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The tax cut for solar PV modules and wind turbine generators is expected to reduce the capital cost for solar and wind power projects by about 5%, said Girishkumar Kadam, Senior Vice President & Group Head, ICRA Ltd.

India, which aims to expand its non-fossil fuel capacity to 500 GW by 2030, currently has about 44 GW of renewable projects awaiting firm power supply agreements.

The tax change poses “a few short-term challenges” as projects awarded before the cut may require renegotiation of existing power supply contracts, said Saurabh Agarwal, tax and new energy partner at EY India.

But Oyster Renewable Energy said the lower tax rate would allow developers to re-engage with utilities at more competitive tariffs, potentially unlocking stuck projects.

Developers that have not yet procured equipment will likely need to pass on the tax benefit to consumers through lower tariffs, while those that already paid the higher rate can justify existing tariff agreements by providing documentation to the federal regulator, said Sanjeev Aggarwal, founder and executive chairman of Hexa Climate Solutions.

Solar equipment maker Waaree Energies said it would pass on the benefits to customers.

Surging renewables capacity

In a report last month, analysts at Barclays noted that India reached 50% non-fossil power capacity in July 2025, five years ahead of its 2030 target. There was room to improve this target, they added, with China having set 70% by 2030.

Meanwhile, Reuters reported that clean electricity production in India has surged by 20% to new highs so far this year, giving utilities a rare chance to cut fossil fuel-fired generation and reduce reliance on energy imports for power production.

India’s clean electricity sources are also on track to provide a third of its utility electricity for the first time over the next month or so, on the back of a record combined output from renewables, hydro and nuclear assets, data from energy think-tank Ember shows.

Over the first half of 2025, India’s utilities generated a record 236 terawatt hours (TWh) of clean electricity, according to Ember. That total is 20% more than during the same months in 2024.

A 29% jump in wind generation (to 47.2 TWh) and a 25% rise in solar generation (to 85 TWh) were the main drivers of the advance in clean electricity supplies.

The collective upswing in multiple clean generation sources is leading to clean power grabbing a record share of India’s generation mix, which will likely exceed 30% for the months of July, August and September.

In June, clean power sources accounted for 31% of the overall generation mix, which was the highest reading on record for that month.

It also meant the share from fossil fuel sources dropped below 70% for the first time.

• Reuters, with additional editing and inputs from Vishakha Saxena

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