In a potential boost to India’s green energy ambitions, the GST fitment committee has recommended a sharp reduction in tax rates on green hydrogen and related technologies. According to officials familiar with the development, the panel has proposed slashing the goods and services tax on green hydrogen from the current 18% to 5%.

The committee has also suggested a similar reduction in GST on key components such as storage batteries and electrolysers—critical enablers of green hydrogen production. These recommendations will be placed before the GST Council at its next meeting, expected in July for a final decision, reported The Economic Times.

The move comes amid growing industry pressure to rationalise tax rates on clean energy technologies. Companies and sectoral bodies have argued that a lower GST would enhance cost competitiveness, drive wider adoption and accelerate India’s transition toward net-zero emissions.

The timing is significant. India has been ramping up domestic readiness in anticipation of growing international demand, especially from Europe. The India-EU Clean Energy and Climate Partnership includes green hydrogen as a strategic area of cooperation with joint research and commercial exchanges likely to gain traction once the final framework is in place.

At home, the government is banking on its flagship National Green Hydrogen Mission, launched in January 2023 to spearhead the transition. With an outlay of ₹19,744 crore, the programme targets production of 5 million tonnes of green hydrogen annually by 2030, aiming to reduce import dependency and decarbonise hard-to-abate sectors.

A lower GST rate could ease early-stage costs, making it easier for investors and manufacturers to scale up operations. If cleared by the Council, the tax cuts may mark a critical step in aligning fiscal policy with India’s broader clean energy goals.

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Panel moots slashing GST on Green H2 to 5%