From cheaper appliances to clarity for drones, stability for EVs, and a boost for renewables, India’s GST reform reshapes industries and sparks festive-season optimism.
The Goods and Services Tax (GST) Council, in its 56th meeting held on Wednesday, announced sweeping reforms to India’s indirect tax structure. Finance Minister Nirmala Sitharaman revealed that the new framework will now be simplified into just two primary slabs: 5% and 18%, with a separate 40% rate maintained for demerit goods.
The revised rates, effective September 22, 2025, are expected to bring relief to households, provide clarity for emerging industries such as the drone sector, and ensure policy stability for India’s growing electric vehicle (EV) sector.
Electronics set to become cheaper
A key highlight of the reforms is the reduction in tax rates on consumer durables, a sector that has long struggled under the highest 28% slab. Televisions, refrigerators, washing machines, air conditioners, and dishwashers will all now be taxed at 18% instead of 28%.
For consumers, this means price drops of ₹1500 to ₹2500 for popular appliances, such as ACs, while televisions, including LCD, LED sets, monitors, projectors, and set-top boxes, will also become more affordable. The festive season now aligns with this, as manufacturers and retailers pass on the tax savings.
However, not all electronics will see a change. Mobile phones and laptops, which already attract 18% GST, remain under the same slab. This means smartphone and laptop buyers will not see additional price relief.
Industry watchers suggest that by keeping high-consumption goods, such as mobile phones, stable, while easing the burden on big-ticket appliances, the Council has struck a balance between revenue needs and consumer demand.
Drones: lifting off with new tax clarity
India’s drone industry, long hindered by fragmented taxation, ranging from 5% to 28% depending on camera integration, has finally received long-awaited clarity. Now, commercial drones will uniformly attract 5% GST, while defence drones, high-performance batteries, and critical communication systems enjoy full exemption.
Smit Shah, President of the Drone Federation of India, welcomed the move, stating that the reform will significantly cut costs, boost adoption across agriculture, logistics, and infrastructure, and support India’s aspirations to become a global drone innovation hub.
India already has over 600 drone startups that have collectively raised more than $500 million. With a simplified GST regime, investors and entrepreneurs now have greater policy clarity to scale operations.
EV makers breathe easy
Contrary to fears of a tax hike, all electric vehicles (EVs), mass-market and luxury alike, will continue to enjoy the 5% GST slab, with no additional cess.
Vasudha Madhavan, Founder and CEO, Ostara Advisors, called it a game-changing step:
“By removing the tax disparity between smaller EVs and larger SUV models, the policy creates a level playing field, improves affordability, and encourages greater consumer choice. On the other hand, the move is expected to keep upfront costs low for customers while accelerating market growth,” she said.
“Importantly, it will also encourage our automotive component manufacturers to build a full-fledged EV component ecosystem in India. Ultimately, it signals India’s intent to make EVs mainstream rather than niche,” Madhavan further remarked.
At the same time, smaller petrol and diesel cars, those under 4 meters in length with engines of up to 1200 cc (petrol) and 1500 cc (diesel), have seen their GST rate fall to 18%, making conventional entry-level cars more affordable.
On the other hand, larger internal combustion (ICE) cars, as well as strong hybrids, will now face a uniform 40% tax, compared with the earlier effective rates of around 50% and 43% respectively.
Toyota Kirloskar Motor, however, reiterated its demand for tax parity between hybrids and EVs, arguing that India’s clean energy transition requires support for all low-emission technologies, not just pure electrics.
Renewable energy: powered by tax breaks
Another milestone of this reform is in clean energy. The GST on renewable energy components, including solar cells, modules, wind turbines, biogas plants, and green hydrogen-related equipment, has been reduced from 12% to 5%.
Dhruv Sharma, CEO of Jupiter International Limited, hailed it as a historic decision:
“This move not only brings down the cost of solar and clean energy solutions but also energises the entire ecosystem: manufacturers, developers, and end users alike.”
The shift is expected to lower renewable project costs by approximately 5%, translating into cheaper tariffs for consumers, while boosting domestic manufacturing and green investment.
A stimulus beyond tax: jobs and MSMEs
“The government’s landmark GST reform represents a crucial step in simplifying India’s indirect tax regime. By consolidating most goods and services into just two slabs—5% and 18%, and maintaining a 40% sin tax on luxury and harmful products, the reform is designed to boost consumer spending, stimulate corporate demand, and ease compliance for millions of small businesses,” highlighted Sachin Alug, CEO, NLB Services.
Lower GST rates on automobiles, appliances, and electronics are expected to drive higher industry volumes, trigger multiplier effects across manufacturing, and uplift allied sectors such as retail, servicing, repairs, insurance, and financing, especially in the lead-up to the festive and wedding seasons.
Alug continued, “This rising demand across supply chains is poised to create jobs not just in factories, but also in sales, logistics, and field services. Labour-intensive sectors like textiles, footwear, gems & jewellery, and agro-processing will likely see a stronger ripple effect, strengthening MSMEs, improving margins, and supporting long-term employment growth. The full impact on business sentiment and job creation will unfold over the next six to nine months.”
As the new regime takes effect on September 22, stakeholders across various sectors will be closely watching to see how these changes reverberate through consumer demand, industrial growth, and India’s broader economic ambitions.
