5% GST on Drones to Boost Defence Sector and ‘Make in India’: says Nomura

The GST on drones has been reduced to 5%. Previously, drones with integrated cameras were taxed at 18%, while those for personal use faced 28%. Under the new rules announced on September 3, all drones—regardless of type or purpose—will now attract a uniform 5% GST. The move is expected to provide a significant boost to the defence sector.

GST Reforms Set to Reduce Indirect Tax Burden on Defence Procurement

Brokerages note that the recent GST rate cuts will provide significant cost relief for India’s defence sector.

Nomura highlighted that defence procurement and domestic manufacturing are highly sensitive to indirect tax policies. “The recent GST revisions have considerably reduced the tax burden on critical equipment, components, and subsystems. Exempting high-value imports and essential spares from IGST will greatly enhance budget efficiency,” the firm noted.

Nomura: Lower Drone Costs to Drive Higher Adoption

The government has exempted GST on remote-piloted aircraft (RPAs) for military use, ship-launched missiles, larger rockets, and diving rebreathers, which will now face lower tax rates. Drones equipped with cameras will also see a steep reduction, with GST falling to 5% from the previous 18–28%.

“Lower costs for surveillance drones used by security forces will boost adoption and enhance operational capabilities,” Nomura said.

The GST exemption for flight and motion simulators is expected to further bolster India’s drone training ecosystem. Civil Aviation Minister Ram Mohan Naidu welcomed the move, stating, “This will encourage the country’s training ecosystem, helping airlines and academies cut costs on training equipment.” 

He added that the measure is likely to lower entry barriers for new pilots and create a pool of better-trained professionals, supporting the long-term growth and operational efficiency of India’s drone industry.

Nomura: GST Reforms Boost Indigenous Manufacturing

Nomura highlighted that these tax reforms will “support indigenous assembly and research” while reducing dependence on costly imports.

Also Read: Army Signs ₹295 Cr Deals for Drones, Munitions from Private Firms