GST on electrolysers cut to 5%: What it means for green hydrogen costs, industries and India’s export ambitions

New Delhi: The GST Council has slashed tax on electrolysers and green hydrogen production from 18per cent to 5per cent. Electrolysers and supporting equipment account for nearly 40per cent of the cost of producing green hydrogen, and experts say the cut could sharply lower production costs, making clean fuel more affordable for industries like refineries, fertilisers, shipping and chemicals.The decision also comes at a time when India is pushing its National Green Hydrogen Mission, seeking to produce 5 million tonnes a year by 2030 and positioning itself as a cost-competitive exporter in global markets.Hemant Mallya, Fellow at the Council on Energy, Environment and Water (CEEW), said electrolysers and the Balance of Plant (BOP) contribute 30–40per cent of the cost of green hydrogen. “A GST exemption will certainly reduce the cost of production and unlock opportunities for its consumption in sectors such as refineries, shipping, and the chemical industry. The recent tenders for green ammonia have shown that India is already cost-competitive globally, and the GST reduction will help India not only meet domestic demand but also cater to the export market,” he said.

Cost projections and competitiveness

The Institute for Energy Economics and Financial Analysis (IEEFA) has estimated that green hydrogen costs in India could fall to ₹260–310 per kg (US$3–3.75/kg) in the next few years, supported by policy incentives, cheaper renewable power and transmission waivers. A lower GST rate is expected to accelerate this trajectory, particularly as India moves to implement its National Green Hydrogen Mission, which has earmarked ₹19,744 crore in incentives for electrolyser manufacturing and production subsidies.

Recent tenders and global positioning

India has already launched tenders for green ammonia exports, where bids indicated competitive pricing against international benchmarks. According to the Ministry of New and Renewable Energy (MNRE), the country aims to produce at least 5 million metric tonnes of green hydrogen annually by 2030. Analysts say that lowering tax barriers could help Indian producers tap into demand from sectors like shipping and steel, where international buyers are looking for lower-carbon supply chains.State-level initiativesSeveral states are advancing large-scale projects. Andhra Pradesh has announced a ₹10,000 crore green hydrogen and ammonia facility near Mulapeta port, with plans to produce 180 kilotonnes per annum of hydrogen by 2029, primarily for exports. Tamil Nadu has set up the HTWO Innovation Centre with Hyundai and IIT Madras to develop fuel cells and electrolyser technology. L&T Energy GreenTech is building India’s largest refinery-linked green hydrogen plant at Panipat for Indian Oil.Andhra Pradesh has also unveiled the “Green Hydrogen Valley – Amaravati Declaration,” targeting 2 GW of electrolyser manufacturing by 2027 and 5 GW by 2029, along with a scale-up to 1.5 million tonnes of hydrogen production annually. The state expects hydrogen prices to fall from the current ₹460/kg to ₹160/kg by the end of the decade.

GST Council rate cut

The GST Council on Wednesday rationalised the indirect tax structure, cutting the current four slabs down to two answering the Indian middle class’ long-pending demand. In a landmark decision that promises to ease household budgets and lift consumer sentiment, the Council scrapped the 12per cent and 28per cent rates, retaining only the 5per cent and 18per cent slabs.Items earlier taxed at 12per cent and 28per cent will now largely migrate to the other two slabs, making a wide range of products cheaper and, policymakers hope, boosting consumption at a time when the economy is looking for fresh momentum.The changes in GST rates of all goods except pan masala, gutkha, cigarettes, chewing tobacco products like zarda, unmanufactured tobacco and bidi, will be implemented with effect from September 22, 2025.

Outlook

The GST cut will align with other financial incentives under the Green Hydrogen Mission, reduce the capital cost burden on producers, and provide a clearer price signal for end-use sectors. Experts say it could also strengthen India’s export credentials at a time when the European Union and Japan are setting up import corridors for low-carbon hydrogen.