GST On Drones Slashed To 5% To Boost India’s Defence Sector

The Indian government has announced a sweeping cut in the Goods and Services Tax on drones, reducing it to a uniform rate of 5% across all types and purposes.

Previously, drones with integrated cameras were taxed at 18%, while personal-use drones attracted a hefty 28% GST.

The new regulations, effective from 3 September 2025, aim to ease the indirect tax burden on the burgeoning drone industry, especially within the defence sector.

GST Cuts to Aid Defence Procurement and Manufacturing

Brokerage firm Nomura highlighted the significant impact these GST changes will have on India’s defence procurement process.

The defence sector is highly sensitive to indirect tax structures, and the recent GST rate revisions have considerably lowered the tax incidence on critical equipment, components, and subsystems.

Additionally, high-value imports and critical spares are now exempt from the Integrated GST (IGST), which Nomura says will ‘significantly improve budget efficiency’ in defence spending.

The GST revision lowers the cost of unmanned aerial vehicles, especially surveillance drones used by security forces.

With GST on drones with cameras dropping from 18–28% to just 5%, the government expects broader adoption of drones, enhancing operational capabilities.

The tax cut also applies to remotely piloted aircraft (RPAs) for military use, ship-launched missiles, larger rockets, and diving rebreathers, all of which will now attract lower GST rates.

This comprehensive tax reduction signals a strong push towards modernising defence technology while making indigenous manufacturing more viable.

The government has also exempted GST on flight simulators and motion simulators, crucial tools in pilot and drone operator training.

Civil Aviation Minister Ram Mohan Naidu praised the reforms, stating, “This move will encourage the training ecosystem in the country, helping airlines and academies reduce expenditure on training equipment.”

He emphasised that lowering training costs will reduce barriers for new pilots and create a pool of better-trained professionals, which will support the long-term growth and operational efficiency of India’s drone industry.

Supporting Indigenous Assembly and Reducing Imports

Nomura further noted that the GST reforms will support indigenous assembly and research efforts by lowering reliance on expensive imports.

The reduced tax rates are expected to encourage domestic manufacturing, making India more self-reliant in defence technologies and drone production.

The uniform GST rate on drones marks a significant step towards modernising India’s defence capabilities while promoting home-grown innovation.

By making drones more affordable and supporting the training ecosystem, the government aims to enhance operational efficiency and bolster the country’s position in the global defence and drone markets.

These reforms will help India accelerate drone industry growth, improve budget management in defence procurement, and strengthen its commitment to ‘Make in India’.

Also Read: India’s Pharma Sector Gets A Boost With GST Cuts On Life-Saving Drugs