Quick Summary
In a major relief to the defence innovation ecosystem, the Ministry of Defence (MoD) has decided to absorb the 18% GST levied on private start-ups and micro, small and medium enterprises (MSMEs) receiving government funds for research and development (RD) of military technologies. The move comes five months after concerns were raised over a tax anomaly that placed private players at a disadvantage compared to government research bodies, universities and DSIR-registered institutions, which were
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FAQ :
The MoD has decided to reimburse the 18% GST levied on defence start-ups and MSMEs that receive government funds for research and development of military technologies.
The reimbursement applies to grants provided under the Innovations for Defence Excellence (iDEX) and the Technology Development Fund (TDF) schemes.
This move addresses a tax anomaly where private players were at a disadvantage compared to government research bodies, universities, and DSIR-registered institutions, which were exempted from GST.
No, this reimbursement is considered an interim arrangement until the GST Council makes a decision on a permanent policy change.
The reimbursement will be applied prospectively, meaning it will cover eligible costs from the date of the office memorandum (July 18) onwards, based on documentary evidence.
Stakeholders warn that taxing innovation could lead promising start-ups and talent to move abroad, potentially undermining India's ambition to lead in disruptive defence technologies.
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