EXECUTIVE SUMMARY
Battery energy storage developers have requested the Indian government to reduce GST on standalone BESS from 18% to 5%, arguing the move would lower storage costs, improve project viability, align taxation with renewable energy equipment, and support the country's expanding energy storage deployment targets.
News Synopsis
The National Solar Energy Federation of India (NSEFI) is an industry association representing companies across India's solar and energy storage sectors. Working with policymakers on regulatory and market issues affecting renewable energy deployment, the federation has submitted representation to the Ministry of New and Renewable Energy (MNRE) proposing that the Goods and Services Tax (GST) on standalone utility-scale and containerised Battery Energy Storage Systems (BESS) be reduced from 18% to 5%. It said the measure would improve the commercial viability of battery storage projects and support wider deployment.
According to the representation, standalone BESS should be recognised as a generation asset similar to solar and wind projects. NSEFI has recommended extending the concessional 5% GST applicable to renewable energy equipment to BESS containers, including battery cells, which typically account for approximately 85-90% of the total system cost.
NSEFI said the current tax structure makes standalone battery storage projects less competitive despite the increasing need for energy storage to support renewable energy integration. It added that concerns over renewable energy curtailment during peak solar generation could be addressed through greater deployment of battery storage systems.
The representation also states that standalone BESS projects should be treated as composite contracts, similar to solar and wind power projects, saying this would simplify project implementation and improve commercial viability.
The Central Electricity Authority (CEA) estimates that India will require around 411.4 GWh of energy storage capacity by 2032, comprising of 236.22 GWh of Battery Energy Storage Systems (BESS) and 175.18 GWh of pumped storage projects.
According to the representation, "Considering this significant deployment potential, the resulting levelised cost of storage reduction could generate an estimated net present value benefit of about INR 24,000 crore (~ $2.51 Billion) which exceeds the estimated GST revenue foregone of nearly INR 20,000 crore (~ $2.09 Billion)." The representation states that the projected economic benefit exceeds the estimated GST revenue foregone, supporting its proposal to reduce the GST rate on standalone BESS.