With the government reducing the Goods and Services Tax (GST) on several rooftop solar system components, installation costs under the PM Surya Ghar: Muft Bijli Yojana have declined by up to 10%, according to industry sources.

In September 2025, the Ministry of Finance reduced the GST rate on high-value system components such as solar modules, cells, and inverters. Other components, including mounting structures, wiring, protection equipment, and junction boxes, also saw tax-cost reductions, contributing to a broader decline in overall system prices.

The GST cut has also lowered engineering, procurement, and construction (EPC) costs, which were previously subject to higher tax rates, further easing installation expenses.

Installers said consumers planning to adopt rooftop solar can now expect a 7%–10% reduction in total system costs, a development likely to accelerate uptake, particularly in Tier-2 and Tier-3 cities.

System Costs to go Down

According to Radhika Choudary, Co-Founder and Director at Freyr Energy, for an average 2 kW-3 kW residential rooftop solar system, the GST rate cut translates to savings of around ₹8,000 (~$88.4) to ₹12,000 (~$132.6), depending on the type of modules and inverters used.

Installers note that before the GST reduction, a typical 2 kW-3 kW residential rooftop solar system in cost between ₹120,000 (~$1,326.2) and ₹140,000 (~$1,547.25), varying across states and component choices. After the GST rate was reduced to 5%, the cost of the same system has dropped to ₹108,000 (~$1,193.59) and ₹125,000 (~$1,381.48).

They say that consumer affordability is one of the biggest drivers of rooftop solar projects, and that reductions in system costs shorten payback periods and reduce upfront capital expenditure.

Alok Karwasra, Senior Vice President at Solarium Green Energy, said that rooftop solar system costs could go down by another ₹10,000 (~$110.5) if state subsidies are factored in.

A typical 3 kW system can generate 3,500–4,000 units annually, helping households save between ₹18,000 (~$198.9) to ₹22,000 (~$243.14) per year, depending on the state’s electricity tariffs. “Over a 20-year lifespan, the cumulative savings can range from ₹100,000–120,000 (~$1326.22) or higher,” said Choudary.

She added that a reduced system price also means consumers will pay lower equated monthly installments (EMIs) on their loans.

Installers say government subsidies and low-cost financing options could help consumers slash their electricity bills by a third.

Karwasra explained that opting for a loan under Jan Samarth, a digital portal linking 14 credit-linked government programs, helps consumers start saving from the very first month. “In case the EMI is equal to the consumer’s electricity bill, the consumer can achieve payback within 3 years. For the remaining project life, the consumer can get free electricity for the amount equivalent to the power bill.”

PM Surya Ghar Targets

India had set a target of 3.5 million households under the PM Surya Ghar program for FY 2026.

As of December 2025, the country has installed rooftop solar systems in 2,396,497 residential households under PM Surya Ghar, reaching nearly 24% of the 10 million target set for the financial year FY 2027. Installers are confident that, with strong policy incentives, falling component prices, and rising consumer awareness, India can meet the target.

India added a record 4.9 GW of rooftop solar capacity in the first nine months of 2025, a 161% year-over-year growth, according to Mercom India’s Q3 2025 India Rooftop Solar Market Report. Of these installations, close to 75% were in the residential segment.

Shreya Mishra, Co-Founder of SolarSquare, said that the GST reduction on solar equipment will be another tailwind for the PM Surya Ghar program.  “While solar has a great return on investment, the high upfront cost is the biggest barrier for middle-class Indian families to adopt solar.”

Solar will become more affordable with lower GST, coupled with subsidies and low-interest loans from public-sector banks, she said. This will drive installations in the residential segment.

Karwasra noted that “With the current trend, the target of reaching 3.5 million in FY26 is possible, given the push and support from both the Ministry of New and Renewable Energy and REC.”

He added that installations are rising in more states than in the previous financial year, with state governments now offering subsidies.  “Vendor registrations and penetration are also increasing significantly month-on-month, indicating greater awareness and adoption of rooftop solar systems.”

Bottlenecks

While rooftop installers are confident they can meet the targets, they also highlight issues that could slow adoption.

Choudary noted that streamlining net-metering approvals, accelerating subsidy disbursal, and adopting consistent state-level guidelines would significantly reduce installation timelines.

She added that there is an urgency to increase the supply and availability of domestic content requirement (DCR)-compliant modules to prevent shortages.  “Standardized quality checks and digital monitoring mechanisms will also enhance system reliability and long-term consumer confidence.”

Karwasra said that, currently, project commissioning takes up to 12 weeks and can be reduced to 3-4 weeks by streamlining the distribution companies’ processes for metering documentation and installations, seamless financing under Jan Samarth, and quicker loan and subsidy disbursements.

State government subsidies, on top of Central financial assistance and the recent GST rate cut on solar components should boost rooftop installations in the coming months.