Green Hydrogen and Battery Storage Tax Cuts Propel India’s Clean Energy Push

India’s GST Council, led by Finance Minister Nirmala Sitharaman, is gearing up for what’s shaping up to be a game-changing GST reform. At their September 3, 2025 meeting in New Delhi, they hashed out proposals to slash tax rates on green hydrogen, electrolysers, and battery storage systems down to a flat 5%. It’s in line with Prime Minister Narendra Modi’s recent Independence Day pledge to trim tax slabs and drive more investment into sustainable energy.

This move is all about knocking down cost hurdles under the National Green Hydrogen Mission, which kicked off in January 2023. Thanks to government incentives, India’s already pushing past 50% non-fossil fuel electricity capacity. The snag? Steep GST bills on gear have jacked up prices and slowed project rollouts. With the new 5% rate for clean-energy tech, the Council also wants to streamline other slabs—likely sticking with just 5% and 18%, plus a top-end 40% for luxury or “sin” goods.

Market Impact

Cutting GST on renewables gear is going to free up some serious savings. Manufacturers of electrolysers and solar panels will see clearer input tax credit paths, while giants like Reliance Industries, Adani Group, Tata Power, and NTPC Ltd could trim capital costs by around 10–15%. Battery storage advocates, led by the India Energy Storage Alliance (IESA), have been pushing for a single 5% rate for ages. If this sails through, solar-plus-storage projects backed by Rs 5,400 crore for 30 GWh and Rs 3,700 crore for 13.2 GWh in viability gap funding might finally take off.

Strategic Implications

For investors and corporates, these cuts mean fatter project IRRs and shorter payback windows, making both green hydrogen and renewables more bankable. Cheaper tariffs also grease the skids for PPA talks, especially for industrial buyers and data centers chasing round-the-clock clean power. To make up for revenue dips from lower renewables taxes, the Council’s eyeing a coal duty hike from 5% to 18% and plans to phase out the compensation cess by March 2026. It’s a balancing act: keep the treasury happy while fueling the push for sustainable energy.

Until now, India’s GST rates were all over the map—5%, 12%, 18%, and 28%—causing headaches around classification disputes and compliance, especially for clean-energy projects. The folks behind this call it GST 2.0. The promise? A simpler, smoother system that slashes red tape and cuts costs for MSMEs in the solar and battery manufacturing space.

Technical Snapshot: Electrolysis & Storage

Under these new rules, electrolysers—you know, the machines that split water into hydrogen and oxygen with renewable power—will land on the same 5% slab as battery energy storage systems (BESS). That tax symmetry should drive down the Levelized Cost of Hydrogen (LCOH) and storage tariffs. The dream is integrated renewable hubs—solar farms, electrolyser clusters, and battery banks—running profitably by 2028.

Domestic players like Waaree Energies and ReNew can finally catch a break on input costs, ramp up production, and pilot new green hydrogen facilities. It also strengthens the case for gigawatt-scale solar parks feeding those electrolysers and battery farms.

Expert Viewpoint

“Cutting GST on hydrogen and storage equipment to 5% is a game-changer for India’s clean energy trajectory,” says an IESA spokesperson. “It tackles the single biggest cost barrier in our sector.” Analysts expect this move to ignite fresh project financing and speed up deployments of green hydrogen and battery storage, though the real impact will hinge on state-level rollouts and clear admin guidelines.

Looking ahead, the GST Council plans to lock in these new rates during its Diwali session, aiming for an October 2025 rollout. Businesses are already reshuffling procurement strategies and capex plans to milk the upcoming tax relief. If everything clicks into place, this GST overhaul could cement India’s status as a global heavyweight in sustainable energy and turbocharge decarbonization across power, transport, and heavy industries.