GST on a Solar EPC Contract in 2026: The 70:30 Split and What It Does to Your Quote

As of October 2026, a solar EPC contract that supplies and installs a solar power plant is valued under a 70:30 rule. Seventy per cent of the gross consideration is treated as goods, taxed at 5% since 22 September 2025 (it was 12% before), and 30% is treated as services, taxed at 18%. The blend is about 8.9% of the contract value. Check every quote states whether it is ex-GST.

What changed on 22 September 2025

The 56th GST Council meeting on 3 September 2025 reduced GST on renewable energy devices and parts for their manufacture from 12% to 5%, effective 22 September 2025. The Council's list names solar power-based devices, solar power generators and photovoltaic cells, whether or not assembled in modules or panels. Tax commentary places the entry in Notification No. 9/2025-Central Tax (Rate), dated 17 September 2025. Read the notification text on the CBIC website, because commentary can misquote an entry number.

The Council's own FAQ also notes that the cut deepens the inverted duty structure that these goods already faced, and that a refund mechanism for inverted duty exists. That matters to module and inverter makers, not to you as a buyer, but it explains why the rate moved only for the goods.

The 70:30 valuation rule

A solar plant is normally bought as one bundle: design, supply of modules, inverters and structures, installation and commissioning. GST law deals with the bundle by deeming a split. An explanation to the goods entry says that if the goods are supplied along with other goods and services, one of which is the taxable service at Serial No. 38 of Notification 11/2017-Central Tax (Rate), the value of the goods is deemed to be 70% of the gross consideration, and the remaining 30% is the value of the service. The service entry covers construction, engineering, installation or other technical services for setting up a solar power generating system.

The explanation first appeared through Notification 24/2018-Central Tax (Rate) of 31 December 2018. From 1 October 2021 it sat under a separate Schedule II entry. The Gujarat Appellate Authority for Advance Ruling has tabulated what that meant for the effective rate.

The last row is our own calculation from the rates above, not a quoted ruling. The services rate of 18% is the one the appellate order applied; confirm it has not changed in the notification your invoice will rely on. The arithmetic for every 100 of contract value is simple: 70 x 5% = 3.50, plus 30 x 18% = 5.40, gives 8.90. A contract priced at 100 excluding GST therefore invoices at about 108.90.

Does your contract fall under 70:30?

The deeming applies to a combined supply, where the same supplier provides the goods and the installation service for setting up the plant. It overrides how the supplier splits its invoices, according to tax commentary on the explanation, so do not expect separate lines for equipment and labour to change the rate. A contract for supply of goods only, or for installation only, is valued and taxed on its own terms. Disputes on classification have gone to courts, so keep the contract structure clean and get your adviser's view before restructuring it to save tax. If you signed a contract before 22 September 2025 and milestone invoices fall after it, ask the supplier which rate it applies to each invoice and on what time-of-supply basis, and have your adviser confirm it. A wrong assumption either way shows up as a credit mismatch later. The cost side of the same contract is explained on our solar EPC page, which publishes a C&I band of ₹24,000–32,000 per kW excluding GST.

Input tax credit for a factory

Whether GST is a cost or a pass-through depends on your own position.

• Registered, taxable outward supplies. Section 16 lets a registered person take credit of tax charged on supplies used in the course or furtherance of business, subject to conditions. These include a valid tax invoice, receipt of the goods or services, the supplier having reported the invoice, and the tax having been paid to the Government.
• Blocked credit. Section 17(5) bars credit on works contract services for construction of immovable property other than plant and machinery. The Act defines plant and machinery as apparatus, equipment and machinery fixed to earth by foundation or structural support and used for making outward supply, including those foundations and supports, but excluding land, buildings and other civil structures. A ground-mounted plant on its own foundations is the clearer case. A roof-mounted plant raises the question of whether it is a building element. Your adviser should answer it for your facts.
• Exempt or mixed supplies. Section 17 apportions credit if you also make exempt supplies, so a hospital, school or mixed business may recover only part.
• Not registered. You cannot claim credit, and the full GST is part of your cost.

If your credit is intact, the ex-GST price is the real cost and GST is a cash-flow item: paid on invoice, recovered through your returns. If it is blocked or partial, evaluate bids on a GST-inclusive basis. See our note on GST works contract and input credit traps for the MEP side, and test the economics in the solar calculator.

How to read an ex-GST quote

Compare bids with the same GST basis, then compare scope. Our guide to evaluating solar EPC proposals shows how to line bidders up.

How Secured Engineers helps

Secured Engineers publishes its C&I solar band excluding GST, so you can see the base price before tax. It designs solar plants in-house and files the CEIG and DISCOM net-metering applications in-house, and MEPF and solar can sit under one contract. The company works from offices in Noida (Delhi NCR) and Ludhiana, with 535+ projects across 18+ states and 89.77% repeat clients. It is an EPC contractor, not a tax adviser, and GST treatment should be confirmed by your chartered accountant.

For a quotation with GST shown at the applicable rate, use our solar EPC service page, send your bills and site details on WhatsApp, call +91 70099 85817, or ask for a free proposal.