Taxing solar power plants at the rate of 1% of the value of the property

Petitioner has challenged Karnataka Grama Swaraj and Panchayat Raj (Grama Panchayat Taxes, Rates and Fees) Rules, 2025, notified on October 17, 2025, to the extent it brings solar power plants under the category of ‘regular industrial building’ for the purpose of levy and collection of property tax. Also, sought quashing of demand notices and assessment proceedings initiated by the concerned gram panchayat authorities for the assessment year 2026-27.

Petitioner argues solar power plants are different class of infrastructure

The petitioner has argued that solar power plants represent a separate class of infrastructure and cannot be treated at par with regular industrial buildings for levy of property tax. The petition stated that earlier the government had notified a tax of ₹5,000 per megawatt per annum to be levied on renewable energy units including solar power plants. This was based on recommendations of an expert committee formed to look into taxation related matters impacting small-scale industries.

It relied on circulars dated February 27, 2018 and March 20, 2020 issued by the government which “prescribed levy ₹5,000 per megawatt per annum for renewable energy units which was continued till date.”

Petitioner had installed solar power plant & were paying taxes as per old regime

It submitted that it had installed solar power plant in Channapattana and Magadi Taluku, MB Halli, H Byadarahalli and Mattikere Gram Panchayats located within Bengaluru South district and had been paying taxes as per the erstwhile regime. The State government, however, later came out with a proposal to levy taxes of ₹10,000 instead of ₹5,000 per megawatt on renewable energy units.

“The said proposal was changed in the final notification dated October 17, 2025 and solar power plants were brought under the category of ‘regular industries’. Thus, subjecting such solar power plants to levy of property tax 1% of the value of the property under Schedule I,” it alleged.

Petitioner claims no explanation was given for change in rules

The petitioner claimed that this was done “without giving any explanation whatsoever and without inviting objections from all the stakeholders especially from the renewable energy stakeholders.”

“It is respectfully submitted that solar power plants are a special category of non-polluting renewable energy generating infrastructure. Unlike the regular industrial setup, they do not have the same operational needs, machinery, equipment, approvals from regulators, etc.,” the plea said.

“The tax, if calculated on the basis of value of the property, instead of the electricity generating capacity of the plant, would far exceed the proceeds that can reasonably be generated from such plant. This would create an unbearable financial burden on such renewable energy projects,” it added.

Government earlier had separate tax regime for solar power plants

It further claimed that the government at one point of time had itself decided to have a separate taxation structure for solar power plants in order to promote investments into generation of renewable energy as well as meet the power demands of the State.

Petitioner claims rules are discriminatory

The petitioner also alleged that the impugned rules are discriminatory as they levy a tax @ 1% of the value of the property on solar parks. While providing for a lower rate of levy for certain other categories of industrial buildings in Schedule II.

It has challenged the issuance of demand notices on the ground that these were issued in “complete violation” of the procedure prescribed under Karnataka Grama Swaraj and Panchayat Raj Act, 1993.