India's push toward rooftop and ground-mounted solar adoption, supported by various subsidy and incentive schemes for residential and commercial installations, has created a growing trade for solar panel installers, EPC (engineering, procurement, construction) contractors, and equipment dealers. The income earned from this work, whether from installation contracts, equipment sales, or ongoing maintenance, is taxable business income with its own set of considerations.
A typical solar installation contract bundles the cost of equipment (panels, inverters, batteries for off-grid or hybrid systems, mounting structures, cabling) with the labour and service of installation. For tax purposes, the contractor's revenue is the total contract value, and the cost of equipment procured plus labour and other installation costs are deductible business expenses, with the difference being the contractor's margin, taxed as business profit, similar in structure to how a construction or fit-out contractor's income is computed.
Various government subsidy schemes for rooftop solar provide a subsidy to the end customer (the homeowner or business installing the system), often routed through or coordinated by the installer. Where the installer receives the subsidy amount on behalf of the customer and passes it through (effectively reducing what the customer pays out of pocket), this pass-through generally shouldn't form part of the installer's own taxable revenue, the installer's revenue would be the net amount actually retained for their work, while if the installer's own contract price already reflects the subsidised price the customer pays, the installer's revenue is simply that contracted amount. Keeping clear documentation of how any subsidy flows through a transaction is important for correctly determining the installer's own taxable revenue.
Many installers offer AMCs for ongoing cleaning, monitoring, and servicing of installed systems, generating recurring revenue beyond the initial installation. This AMC income is additional business income, recognised over the period it relates to, and the costs of providing this maintenance service (technician visits, spare parts, monitoring software costs) are deductible against it.
Solar power generation equipment and related installation services have their own specific GST rate considerations (often involving a composite supply of goods and services with rates that can differ from standard goods or services rates), and GST registration would be required once the business's turnover crosses the applicable threshold, an important compliance area for solar installers given the materials-heavy nature of their contracts.