GST 2.0 reforms and their impact on Defence, Renewables, and related sectors

Kokila Chokkanathan
Key Points of GST 2.0 Reforms (Effective 22 Sep 2025)

1. Simplified GST Structure

o Current four-tier GST system replaced with two rates: 5% and 18%.

2. Defence Sector Benefits

o Lower GST on critical equipment, components, and subsystems reduces the overall tax burden.

o High-value imports and spares exempted from IGST, improving budget efficiency.

o GST cut to 5% on high-tech imports like drones provides long-term lifecycle savings.

o Encourages indigenous manufacturing and procurement efficiency.

3. Renewables & Solar Energy

o GST on critical inputs for renewable projects reduced from 12% → 5%, improving internal rates of return.

o Increases competitiveness of solar energy vs fossil fuels.

o Accelerates rooftop solar adoption and supports India’s 2030 renewable energy targets.

4. Industrial Machinery & MSMEs

o GST cut from 28% → 18% reduces machinery and equipment costs.

o Benefits MSMEs, encourages modernisation, and lowers input costs for agriculture and logistics sectors.

o Includes reductions on engines, engine pumps, fuel/lubricant pumps, etc.

5. Engineering, Procurement & Construction (EPC)

o Affordable housing projects benefit from lower material costs.

o government infrastructure projects may see higher costs due to GST increases on earthwork-heavy contracts.

✅ Overall Impact:

  • Boosts Defence, renewable energy, solar adoption, and industrial machinery sectors.
  • Encourages domestic manufacturing, cost-efficiency, and sectoral growth.
  • Supports India’s strategic and sustainable development goals.
 

Disclaimer:

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.

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