Looking for expert help with GST and income tax for solar panel installers India? The team at Tax Garden, based in Kondapur, Hyderabad, helps Indian SMEs stay compliant. End-to-end filings, notices, and deadline tracking, all in one place.
Key Takeaways
- A rooftop solar job where you supply the system and install it is split 70% goods at 5% and 30% service at 18%, so 8.9% effective GST on the contract (Notification 9/2025-CT(Rate), Sch I S. No. 437, read with Notification 11/2017-CT(Rate), S. No. 38).
- Panels sold without installation are 5%. Installation of a system the customer bought elsewhere is 18%.
- The rate on solar devices was 12% until 21 September 2025 and 5% from 22 September 2025. Old quotes need repricing.
- You supply a service, so GST registration starts at Rs 20 lakh turnover.
- Under Section 44AD, deemed profit is 6% of digital receipts and 8% of cash receipts, for turnover up to Rs 2 crore (Rs 3 crore if cash is within 5%).
What is the GST rate on solar panel installation in India? When an installer supplies solar panels or a solar power system together with installation, GST law deems 70% of the total contract value to be goods taxed at 5% and 30% to be the installation service taxed at 18%. That works out to 8.9% of the contract value (Notification 9/2025-Central Tax (Rate), Schedule I, S. No. 437, in force from 22 September 2025).
Rooftop solar orders have picked up across the country, and most installers are small teams that grew out of electrical contracting. The GST side catches many of them: a single contract mixes panels, an inverter, a mounting structure, cabling and labour, and the law doesn't let you pick the rate line by line. This guide covers the 70:30 rule, the GST 2.0 rate change, registration, whether the 6% scheme makes sense, e-way bills and TDS, then how your income is taxed for FY 2025-26 (AY 2026-27). If you also run a counter selling wires and lights, our GST guide for electrical shops covers those rates.
How the 70:30 rule works on a solar contract
Start with the two entries that govern your business.
The goods entry. Schedule I of Notification 9/2025-Central Tax (Rate) taxes renewable energy devices at 2.5% CGST plus 2.5% SGST, so 5% (S. No. 437). The entry names solar power-based devices, solar power generators, solar lanterns and lamps, and photovoltaic cells "whether or not assembled in modules or made up into panels", along with parts for their manufacture.
The service entry. S. No. 38 of Notification 11/2017-Central Tax (Rate) covers "construction or engineering or installation or other technical services, provided in relation of setting up of" these devices, including a solar power generating system. It carries 9% CGST plus 9% SGST, so 18%. It was inserted by Notification 27/2018-Central Tax (Rate), and the GST 2.0 amendment (Notification 15/2025) only updated its cross-reference to the new goods entry.
The deeming rule. The Explanation to S. No. 437 says that if these goods are supplied by a supplier along with other goods and services, one of which is the S. No. 38 service, the value of the goods is deemed to be 70% of the gross consideration and the remaining 30% is deemed to be the value of the service.
Say you sign a 3 kW rooftop contract with a family for Rs 2,00,000 before tax, covering panels, inverter, structure, cabling and installation.
| Portion | Value | Rate | GST |
|---|---|---|---|
| Goods (70%) | Rs 1,40,000 | 5% | Rs 7,000 |
| Installation service (30%) | Rs 60,000 | 18% | Rs 10,800 |
| Total | Rs 2,00,000 | 8.9% effective | Rs 17,800 |
The invoice total is Rs 2,17,800. Split each line equally between CGST and SGST for a job in your own State: Rs 3,500 plus Rs 3,500 on the goods, and Rs 5,400 plus Rs 5,400 on the service.
Billing the whole job at 5% would show only Rs 10,000 of tax and under-report Rs 7,800. Billing it all at 18% would charge the family Rs 36,000, Rs 18,200 more than the law requires, and you'd lose orders over it.
Comparison
GST on Solar Supplies (from 22 September 2025)
| What you supply | Entry | GST |
|---|---|---|
| Panels or a solar system with installation, one supplier | 9/2025-CT(R) Sch I S. No. 437 Explanation + 11/2017-CT(R) S. No. 38 | 70% at 5%, 30% at 18% (8.9% overall) |
| Solar panels or PV modules sold without installation | 9/2025-CT(R) Sch I S. No. 437(h) | 5% |
| Solar water heater and system | 9/2025-CT(R) Sch I S. No. 428 | 5% |
| Installation only, customer bought the system elsewhere | 11/2017-CT(R) S. No. 38 | 18% |
| Steel mounting structures bought on their own | 9/2025-CT(R) Sch II S. No. 286 (7308) | 18% |
| Before 22 September 2025: solar devices | 1/2017-CT(R) Sch II S. No. 201A | 12% |
Source: Notification 9/2025-Central Tax (Rate) Schedules I and II; Notification 11/2017-Central Tax (Rate) S. No. 38 as inserted by 27/2018 and amended by 06/2021 and 15/2025; Notification 8/2021-Central Tax (Rate)
Splitting the contract doesn't change the split. Some installers write 90% goods and 10% installation on the invoice to bring the tax down. The Explanation deems the value of the goods as 70% "of the gross consideration charged for all such supplies", whatever the invoice says, as long as you supply both. Use 70:30.
Old quotations. Before 22 September 2025, solar devices sat in Schedule II of Notification 1/2017-Central Tax (Rate) at 12% (S. No. 201A, inserted from 1 October 2021 by Notification 8/2021). A quote you gave in August 2025 with 12% on the goods portion is out of date for an invoice issued now.
Inverters and other parts bought on their own. The 5% entry covers the devices it names and parts for their manufacture. A static converter of heading 8504 bought on its own is listed at 18% in Schedule II (S. No. 477). Check the HSN and rate on each supplier's invoice before you assume the 5% rate on your purchases.
When does a solar installer need GST registration?
At Rs 20 lakh of aggregate turnover in a financial year (Section 22(1), CGST Act), or Rs 10 lakh in a special category State that hasn't raised its limit. A State can allow a higher limit only for suppliers "engaged exclusively in the supply of goods" (third proviso to Section 22(1)). Installation is a service, so that doesn't cover you.
At an average of Rs 2,00,000 per home, you reach Rs 20 lakh at about 10 installations a year. Apply within 30 days of crossing the limit. In practice most installers register early, because housing societies, commercial clients and channel partners usually want a GSTIN on the invoice. Our GST registration service handles the application.
Should you choose the 6% scheme or regular GST?
Notification 2/2019-Central Tax (Rate) lets a small business pay 3% CGST plus 3% SGST, so 6%, on its first Rs 50 lakh of supplies in a year. You qualify only if:
- Aggregate turnover in the previous financial year was Rs 50 lakh or below.
- You aren't eligible for the regular composition scheme under Section 10(1). That scheme allows services only up to 10% of turnover or Rs 5 lakh, whichever is higher. With 30% of every contract deemed a service, most installers are outside it.
- You make no inter-State outward supply. One rooftop job across the State border ends your eligibility.
- You make no supply that isn't leviable to GST, and nothing through an e-commerce operator that collects tax at source.
Under the scheme you issue a bill of supply, charge no GST to customers and claim no input tax credit (ITC). For an installer that last point usually decides it.
Take one month. You bill households Rs 4,00,000, and your prices are fixed, so GST comes out of that amount. You paid Rs 14,000 GST on panels, structures and cables you bought.
| Regular GST (8.9% effective) | 6% scheme | |
|---|---|---|
| GST inside Rs 4,00,000 | Rs 32,691 (8.9/108.9) | Rs 24,000 (6%) |
| Input tax credit | Rs 14,000 | None |
| GST you pay the government | Rs 18,691 | Rs 24,000 |
Here the regular scheme costs Rs 5,309 less. The break-even is ITC of Rs 8,691 a month on this billing. Because panels and structures make up much of your cost, most installers clear that comfortably. Run the numbers on your own purchase bills before you opt in. Our composition scheme guide explains the other conditions.
Step-by-Step Guide
GST Setup for a Solar Installer
Sort your jobs
Supply plus installation: 70% at 5%, 30% at 18%. Panels only: 5%. Installation only: 18%.
Track turnover against Rs 20 lakh
Installation is a service, so the goods-only limit doesn't apply. Register within 30 days of crossing it.
Stay on regular GST unless the numbers say otherwise
Compare 6% of turnover with 8.9% less your monthly ITC on panels, structures and cables.
Generate e-way bills
For a consignment value above Rs 50,000, generate an e-way bill before the panels leave your godown (Rule 138(1), CGST Rules).
Bill and file
Tax invoice with two lines, goods at 5% and service at 18%, then GSTR-1 and GSTR-3B every month or quarter.
Source: Section 22, CGST Act; Rule 138, CGST Rules; Notifications 2/2019, 11/2017 and 9/2025-Central Tax (Rate)
E-way bills. Panels for even a 3 kW home system are usually worth more than Rs 50,000. A registered person causing movement of goods of consignment value above Rs 50,000 must file Part A of Form GST EWB-01 before the goods move (Rule 138(1), CGST Rules). Some States set their own rules for movement within the State; our state-wise e-way bill guide lists them. Our GST return filing service keeps your 5% and 18% lines matched in GSTR-1 every period.
How is a solar installer's income taxed for FY 2025-26?
Business or profession? Supplying and installing systems is a business. A solar engineer who only designs systems or advises clients is carrying on the engineering or technical consultancy profession named in Section 44AA(1) of the Income-tax Act 1961, and 44AD isn't open for that income. See our Section 44ADA guide for professionals.
Presumptive tax. A resident individual, HUF or partnership firm (not an LLP) running an installation business can declare profit under Section 44AD if turnover is up to Rs 2 crore, or up to Rs 3 crore where cash receipts are within 5% of the total. Deemed profit is 6% of receipts by account payee cheque, bank transfer or other prescribed electronic mode, and 8% of the rest. From tax year 2026-27 the same rule is Section 58(2), Table S. No. 1, of the Income-tax Act 2025. Our Section 44AD guide has the detail.
Example 1 (FY 2025-26, new regime): turnover Rs 80 lakh, all received by bank transfer and UPI.
- Deemed profit: 6% of Rs 80,00,000, so Rs 4,80,000.
- Tax under Section 115BAC(1A): nil up to Rs 4 lakh, then 5% of Rs 80,000, so Rs 4,000.
- Income is under Rs 12 lakh, so the Section 87A rebate (up to Rs 60,000) cancels it. Tax: nil, if this is the only income.
Example 2: turnover Rs 2.8 crore, with Rs 8.4 lakh (3%) in cash. Cash is within 5%, so the Rs 3 crore limit applies.
- Deemed profit: 6% of Rs 2,71,60,000 (Rs 16,29,600) plus 8% of Rs 8,40,000 (Rs 67,200), so Rs 16,96,800.
- Tax: Rs 20,000 (Rs 4-8 lakh at 5%) plus Rs 40,000 (Rs 8-12 lakh at 10%) plus Rs 60,000 (Rs 12-16 lakh at 15%) plus Rs 19,360 (Rs 96,800 at 20%), so Rs 1,39,360. No 87A rebate above Rs 12 lakh.
- With 4% cess (Rs 5,574), the total is Rs 1,44,934.
The five-year lock. Declare 44AD profit one year and a lower profit in any of the next five, and you lose 44AD for five years (Section 44AD(4)). During that time you must keep books and get them audited if income is above the basic exemption limit (Section 44AD(5)). Our ITR filing service compares 44AD with actual profit before you commit.
TDS on payments you receive
Households don't deduct. An individual or HUF paying for work done "exclusively for personal purposes" isn't liable to deduct TDS under Section 194C (Section 194C(4)). A family installing panels on its own house pays you in full.
Business customers may. A company, firm, trust or society that pays you for carrying out work under a contract deducts 1% if you're an individual or HUF and 2% otherwise, once a single payment exceeds Rs 30,000 or the year's total exceeds Rs 1 lakh (Section 194C(1) and (5)). From 1 April 2026 the same rates are in Section 393(1), Table S. No. 6(i), of the Income-tax Act 2025. Note that the definition of "work" in Section 194C excludes supplying a product made to the customer's specification from material bought from someone else. Customers read solar contracts differently, so check Form 26AS every quarter and claim whatever was deducted. Our Section 194C guide explains the rules.
Common mistakes solar installers make
- Billing the whole rooftop job at 5%. Only the 70% deemed goods portion is 5%. The 30% installation portion is 18%.
- Writing a lower installation value on the invoice. The 70:30 split is deemed by law. A 90:10 invoice doesn't change the tax due.
- Using pre-22 September 2025 quotes. Solar devices moved from 12% to 5%. An old quote overstates the tax on the goods.
- Opting for the 6% scheme without checking ITC. Installers lose credit on panels and structures, which often outweighs the lower rate.
- Moving panels without an e-way bill. A home system can cross Rs 50,000 easily.
How Tax Garden helps solar installers
We set up your invoice format with the 70% goods and 30% service lines, check your purchase HSNs, and register you through our GST registration service. We file GSTR-1 and GSTR-3B with your ITC matched through our GST return filing service, and prepare your return under Section 44AD or on actual profit through our ITR filing service.
