GST Council May Introduce Uniform 5% GST on Commercial Drones to Streamline Taxation:

As quoted in a report by Business Standard, the GST Council may consider applying a general 5 percent GST charge to all commercial drones in the forthcoming meeting to eliminate the uncertainty regarding the classification of Unmanned Aircraft Systems (UAS) and offer more industry guidance.

In an interview with Business Standard, a participant in the talks reported, “After industry representatives asked the Council to address classification concerns, the fitment committee during its last meeting set a recommendation of 5 percent for all categories of drones. The proposed uniform rate will facilitate tax compliance and help promote the use of drones in different industries for greater efficiency."

At the moment, drones incur differing GST rates depending on their type. Use-case business drones, which operate as aircraft, are placed at the lower HSN code 8806 and incur a 5 percent GST. However, mid-category drones bundled with cameras are captured under HSN 8525 classification as digital cameras and attract an 18 percent tax. For non-commercial drones, the higher HSN 8806 nomenclature is used, but the higher 28 percent tax is charged.

The Indian government has implemented new policies to facilitate the employment of drones in agriculture, logistics, public safety, and construction. Drones can now fly in non-green zones which is airspace not designated as red or yellow, for example, below 400 feet. In addition, the Ministry of Civil Aviation has modified some of the rules for micro and nano ‘non-commercial’ drones through The Drone (Amendment) Rules, 2023, further easing their restriction on the use of micro and nano non commercially used drones. Moreover, campaigns such as ‘Namo Drone Didi’ have been started to assist Women Self Help Groups in the agriculture space.

The confusion stems from changes made to the government notifications in December 2021 which introduced multiple GST rates for different categories of drones. The most debated issue remains the classification of drones with removable cameras. In some cases, tax authorities classify those drones as camera equipment rather than aircraft which justifies an 18 percent GST charge. The industry seems to agree that drones need to be classified based on their first intent: airborne mobility as reported by the Business Standard.