The GST Council is likely to take up a proposal at its next meeting to impose a uniform 5% GST rate on renewable energy engineering, procurement and construction contracts. Currently, EPC contracts attract mixed rates depending on whether the supply is treated as goods or services, creating classification disputes and raising project costs. A flat rate would simplify compliance for solar and wind project developers and reduce the cascading duty burden on India's clean energy buildout.

EPC contracts bundle equipment supply, civil works, and commissioning into a single turnkey agreement. Under the current GST framework, the tax treatment of such contracts is contested: the goods component (solar panels, turbines, inverters) attracts 5–12% GST, while the services component (installation, construction) can attract 18%. When the contract is treated as a composite supply, the principal supply determines the rate; when it is treated as a mixed supply, the highest rate applies. This ambiguity has led to prolonged litigation and advance-ruling disputes, raising effective project costs and discouraging investment in renewable capacity.

A flat 5% rate, if adopted, would eliminate the classification problem entirely. It aligns with India's existing concessional GST treatment for solar energy devices (5%) and positions renewable EPC at par with affordable housing construction contracts, which also carry concessional rates. For the broader policy context, India has committed to 500 GW of non-fossil electricity capacity by 2030 under its Nationally Determined Contribution (NDC). Higher tax incidence directly inflates the levelised cost of energy (LCOE), making renewable projects less viable without subsidy support. A GST rationalisation therefore functions as an indirect fiscal incentive—equivalent in effect to a production-linked or capital-subsidy instrument. For exam purposes, connect this to the GST Council's constitutional mandate under Article 279A, its role in rationalising rates, and India's energy transition commitments under the Paris Agreement.