Many small installers price by copying the competitor's per-kW rate and hoping the job makes money. Some do; many quietly lose money on travel, rework, DISCOM visits and the five years of maintenance they promised. A proper cost sheet takes 20 minutes per design and tells you exactly what you earn, what you can discount, and where you are exposed.
Step 1: the bill of materials
List every item with quantity and current supplier price. Prices move (modules especially), so date the sheet and refresh it monthly.
Worked example: 3.3 kWp DCR on-grid home (illustrative 2026 prices)
| Item | Basis | Cost (₹) |
|---|---|---|
| Modules: 6 × 550 Wp DCR | ₹24/Wp | 79,200 |
| On-grid inverter 3 kW | 18,000 | |
| Structure, elevated HDG | 13,000 | |
| DC and AC cables, MC4, conduit | 7,000 | |
| DCDB and ACDB with SPDs, MCB, isolator | 5,000 | |
| Earthing (bonded electrodes) and lightning protection where needed | 7,500 | |
| Net meter and DISCOM fees (pass-through) | 4,000 | |
| Anchors, sealant, consumables | 2,500 | |
| Materials total | 1,36,200 |
Replace every figure with your own supplier quotes. DCR modules cost noticeably more per Wp than non-DCR, which is why subsidy jobs are priced higher per kW.
Step 2: the costs people forget
| Item | Cost (₹) |
|---|---|
| Installation labour (crew of four, about two days) | 9,000 |
| Transport and material handling | 2,500 |
| Liaison, documentation, portal uploads, DISCOM visits | 2,500 |
| Five-year CMC reserve (visits, small parts) | 4,000 |
| Direct cost | 1,54,200 |
Then add overheads that are not tied to one job: site surveys that did not convert, sales staff and commissions, office, vehicle, insurance, warranty reserve for workmanship claims, and the cost of money while you wait for payment. Spread them as a percentage. Here we use 6%: 1,54,200 × 0.06 = 9,252.
Total cost: ₹1,63,452
Step 3: margin, not markup
- Markup is profit as a percentage of cost.
- Margin is profit as a percentage of price.
They are not the same. For a 12% margin:
Price (ex-GST) = Cost ÷ (1 − margin) = 1,63,452 ÷ 0.88 = ₹1,85,741 Profit = 1,85,741 − 1,63,452 = ₹22,289, which is 12% of price (and 13.6% markup on cost).
If someone instead adds a 12% markup: 1,63,452 × 1.12 = ₹1,83,066, and the margin is only 10.7%. On a business doing ₹5 crore a year that difference is about ₹6.5 lakh.
What margin is right? It depends on your overhead structure, your risk, and the market. Residential solar is competitive; a thin margin leaves nothing for the inevitable problem job. Know your number and do not discount below the margin that covers your fixed costs.
Step 4: GST
Rooftop solar systems are usually supplied as a composite EPC contract: goods and installation services together. Under the GST Council's deemed valuation for solar power generating systems, 70% of the contract value is treated as goods and 30% as services. After the rate changes effective 22 September 2025:
- Goods portion (70%) at 5%
- Services portion (30%) at 18%
- Effective rate: 0.7 × 5% + 0.3 × 18% = 3.5% + 5.4% = 8.9%
(Before September 2025 the goods rate was 12%, giving about 13.8%.)
For our example: GST = 1,85,741 × 0.089 = 16,531.
Quoted price: ₹2,02,272 including GST, about ₹61,300 per kWp. That sits within the market range in our benchmarks (₹46,000–70,000 per kW installed, DCR systems in the upper half).
Notes, to confirm with your chartered accountant: - Batteries supplied separately are taxed at their own rate (18% for lithium-ion and lead-acid batteries as of 2026). Invoice them as a separate line or contract as your CA advises. - Items sold without installation (a module or inverter alone) attract their own goods rate. - Pass-through DISCOM fees paid on the customer's behalf may be treated differently from your supply; keep receipts. - Claim input tax credit on your purchases correctly; it is a large share of your working capital.
Step 5: price per kW is an output, not an input
Customers compare per-kW prices, so you need to be able to explain yours. But calculate the price from the cost sheet and then check it against the market, not the other way round. If your per-kW price is much higher than the market:
- Is your BOM over-specified (a 1.3 DC/AC ratio where 1.1 would do, an oversized structure)?
- Are your overheads too high for your volume?
- Or are competitors cutting corners you will not cut (non-DCR modules on a subsidy job, no earthing, no CMC)? Then explain the difference line by line, with photos of good and bad work.
Sensitivity: what moves the price most
- Module price ±₹2/Wp: ±₹6,600 on this job
- One extra day of crew labour: about ₹4,500
- One extra DISCOM visit: ₹500–1,000 in time and travel
- A three-month payment delay on 20% of the contract: interest cost on about ₹40,000
Know which of these you control.
Key points
- Build the price from a dated BOM plus labour, transport, liaison, CMC reserve and overheads.
- Margin is profit ÷ price; price = cost ÷ (1 − margin). A markup of the same percentage gives a lower margin.
- Composite solar EPC contracts use the 70:30 GST split: 5% on goods and 18% on services, about 8.9% overall from 22 September 2025; confirm with your CA.
- Batteries and stand-alone items have their own GST rates.
- Check your calculated per-kW price against the market and be ready to explain every difference.
Check yourself
- Total cost is ₹2,00,000 and you want a 15% margin. What is the price before GST?
- What is the effective GST on a ₹1,00,000 composite solar EPC contract under the 70:30 rule (5% and 18%)?
- Why is a 12% markup less profitable than a 12% margin?
Answers
- 2,00,000 ÷ 0.85 = ₹2,35,294.
- 70,000 × 5% + 30,000 × 18% = 3,500 + 5,400 = ₹8,900 (8.9%).
- Markup is calculated on the lower cost figure, so the profit is smaller; 12% markup equals only about 10.7% margin.