Solar panel HSN Code

Understand the Right HSN Code for Your Solar Panel

The solar energy sector is growing rapidly, and with that comes the need for clear tax compliance. If you are a manufacturer, supplier, or installer of solar panels, understanding the correct HSN code and GST rate is crucial. The classification of solar panels and related components depends on their function within the electrical system.

Solar Panels as Photovoltaic Cells

Solar panels, also known as solar modules or photovoltaic (PV) panels, are designed to convert sunlight into electricity. They fall under Chapter 85 of the HSN, which covers “Electrical machinery and equipment and parts thereof.”

• HSN 8541: This is the primary heading for “Diodes, transistors and similar semi-conductor devices; photosensitive semi-conductor devices; including photo voltaic cells, whether or not assembled in modules or made up into panels.”
• The most relevant HSN codes for solar panels are 85414012 and 85414300, which specifically describe solar cells assembled in modules or made up into panels.

Understand the GST Rate for Solar Panels

There has been a change in the GST rate for solar panels. While some older records show an 18% GST rate, the current applicable rate for solar photovoltaic cells and modules is 12%. This rate applies to the solar panel itself.

Classify Other Solar System Components

A complete solar power system consists of more than just the panels. Here’s how other components are classified:

• Solar Inverters: These devices convert the DC power from the panels into AC power for use in homes and businesses. They are classified under HSN 8504, and the GST rate is typically 12% when sold as part of a solar power generating system. If sold separately, they may attract a higher GST rate.
• Solar Water Heaters: These systems use solar energy to heat water. They are classified under HSN 84191200 with a GST rate of 12%.
• Solar Collectors: These are devices that collect solar radiation. They are classified under HSN 76151012 with a GST rate of 18%.
• Solar-Based Gadgets: Other equipment and gadgets that operate on solar energy are often classified under HSN 8543, with a GST rate of 18%. This includes items like solar batteries, lamps, and other standalone solar-powered devices.
• Mounting Structures: The structures that hold the solar panels are typically made of iron, steel, or aluminum. They are classified under their respective HSN codes (e.g., HSN 7308 for steel structures) and have a GST rate of 18%.

The HSN Code for a Complete Solar System

When you sell a complete solar power generating system, it is considered a “composite supply” and is subject to a specific GST rate.

• Composite Supply: For the supply of a solar power plant, a concessional rate of 12% GST is applied to 70% of the value of goods, while the remaining 30% for services (installation, etc.) is taxed at 18%. This leads to an effective blended rate. The HSN for the entire system is often cited as 8541.
• Installation and Commissioning Services: The services involved in installing and commissioning a solar plant are classified under SAC code 9954 and are taxed at 18%.

To ensure proper compliance, businesses must accurately identify the product, whether it is a standalone panel, a component, or a complete system, and apply the correct HSN code and GST rate accordingly.