India's capital goods sectors, including Defence, renewable energy, and industrial machinery, stand to gain significantly from the upcoming revision of the Goods and Services Tax (GST) structure, according to a report by Japan-based brokerage Nomura.
The current four-tier GST system will be replaced by a two-rate structure of 5 per cent and 18 per cent, effective September 22, 2025.
Defence procurement and indigenous manufacturing, highly sensitive to indirect tax structures, will benefit from the GST revisions, which will substantially reduce the tax burden on critical equipment, components, and subsystems. &ldquo;High-value imports and critical spares being exempted from IGST will significantly improve budget efficiency,&rdquo; the report noted.
The government has also cut GST to 5 per cent on several high-tech Defence imports, including drones, offering long-term savings on lifecycle equipment expenses.
Renewable energy projects are expected to see improved internal rates of return as GST on critical inputs and equipment shifts from the 12 per cent slab to 5 per cent. Nomura said, &ldquo;This GST cut enhances the competitiveness of solar energy versus fossil fuels, accelerates rooftop solar adoption, and supports India&rsquo;s renewable energy targets for 2030.&rdquo;
The reduction of GST from 28 per cent to 18 per cent will provide substantial relief for MSMEs by lowering machinery costs across multiple sectors and encouraging modernisation. GST on spark or compression ignition engines, engine pumps, fuel or lubricant pumps for garages, and related items has been reduced to 18 per cent. This will help cut input and equipment maintenance costs for MSMEs in agriculture and logistics.
Nomura added that the GST changes will have mixed effects on the engineering, procurement, and construction sector. Affordable housing projects will benefit from lower material costs, whereas government infrastructure projects may face higher costs due to the increased GST on earthwork-heavy contracts. [Except for the headline, this article has not been edited by the Benefit News editorial team and is published directly from the IANS news feed]

GST 2.0 to power Defence, renewables growth

New GST rates to ease tax burden on Defence, MSMEs, renewables and solar projects

GST 2.0 to power Defence, renewables growth

New GST rates to ease tax burden on Defence, MSMEs, renewables and solar projects

September 8, 2025 | 13:49 IST