GST Council likely to fix uniform 5% tax on all commercial drones

The Goods and Services Tax (GST) Council is likely to introduce a uniform 5 percent GST rate on all commercial-use drones in its upcoming meeting, according to a Business Standard report citing sources. The move aims to remove ambiguity in the classification of unmanned aircraft systems (UAS) and provide greater clarity to the industry.

A source familiar with the discussions told Business Standard, "The fitment committee, in its last meeting, recommended a 5 percent rate for all types of drones after industry representatives urged the Council to resolve classification issues. The proposed uniform rate is expected to streamline taxation and encourage the widespread adoption of drones across multiple sectors."

Currently, different types of drones attract varying GST rates based on their classification under different Harmonized System Nomenclature (HSN) codes. Business-use drones, categorized as aircraft under HSN code 8806, are taxed at 5 percent, while drones with integrated cameras fall under HSN 8525 and are subject to an 18 percent GST rate as they are classified as digital cameras. Drones for personal use, though listed under HSN 8806, are taxed at a much higher rate of 28 percent.

The Indian government has recently introduced measures to promote drone usage in sectors such as agriculture, logistics, public safety, and construction. For instance, drones can now operate in green zones—airspace up to 400 feet that is not designated as red or yellow—without requiring special permissions. The Ministry of Civil Aviation has also relaxed certain regulations through the Drone (Amendment) Rules, 2023, expanding the scope for micro and nano drones for non-commercial purposes. Additionally, initiatives like ‘Namo Drone Didi’ have been launched to empower women-led self-help groups in the agricultural sector.

The classification confusion arose after amendments to government notifications in December 2021, leading to multiple GST slabs for different types of drones. A primary point of contention has been the treatment of drones with detachable cameras. Tax authorities have sometimes levied an 18 percent GST rate on such drones by categorizing them as camera equipment rather than as aircraft. Industry experts argue that drones should be classified based on their primary function—airborne mobility—rather than additional accessories, Business Standard reported.