Thiruvananthapuram: The Goods and Services Tax (GST) on renewable energy equipment has been reduced, lowering the cost of installing rooftop solar plants. The tax has been cut from 12 per cent to 5 per cent, which is expected to bring down equipment prices by around 7 per cent. Dealers estimate that the cost per kilowatt could fall by ₹3,000 to ₹4,000. However, the GST on services related to solar plant installation will remain unchanged at 18 per cent.

The Centre expects that the tax cut will encourage more households and institutions to install solar plants, thereby boosting green energy production. However, in Kerala, stakeholders fear that the benefit may not be fully realised, as the government is in the process of framing new regulations that restrict existing incentives for solar producers.

“Demand has already fallen in Kerala, with the number of new rooftop plants dropping by nearly half every month,” said Shivaramakrishnan, state president of the Kerala Renewable Energy Enterprises and Promoters Association (KREEPA).

The Regulatory Commission, however, maintains that rooftop solar plants will continue to be profitable even under the new rules, though the time taken to recover investments will be longer. There is also uncertainty over when the rules will take effect. Although the draft notification had stated October 1 as the implementation date, the process has been delayed. The High Court has directed the Regulatory Commission to hold physical hearings instead of online consultations. The Commission plans to approach the Supreme Court, and future action will depend on the court’s decision.

Meanwhile, the GST on coal and lignite used as fuel in thermal power plants has been increased from 5 per cent to 18 per cent. Concerns were raised that this would push up electricity tariffs by 15 to 35 paise per unit. However, as the cess on coal and lignite has been scrapped, the impact of the higher GST is expected to be offset.