Quick Summary
In a move that could significantly impact India's defence innovation ecosystem, Defence Minister Rajnath Singh is expected to raise concerns with Finance Minister Nirmala Sitharaman over the 18% GST levied on grants provided to private companies for defence-related research and development (RD). The issue has come into sharp focus after several MSMEs and start-ups that received RD grants under the Defence Research and Development Organisation's (DRDO) Technology Development Fund (TDF) reported
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FAQ :
The main issue is the 18% GST levied on grants provided to private companies, including MSMEs and start-ups, for defence-related research and development (R&D).
Defence Minister Rajnath Singh is expected to raise these concerns with Finance Minister Nirmala Sitharaman. The DRDO has also flagged the issue.
State-run research institutions, universities, and colleges are exempt from GST on R&D grants, while private companies and start-ups are still subject to the 18% tax.
Schemes like the Technology Development Fund (TDF) by DRDO, Innovations for Defence Excellence (iDEX), and ADITI are affected, as these rely on private sector innovation.
The government is committed to fostering innovation, as shown by increased budget allocations for DRDO and iDEX, and aims for self-reliance in defence under the 'Aatmanirbhar Bharat' initiative.
The meeting is expected to pave the way for potential GST relief for MSMEs and start-ups involved in defence R&D, aligning taxation policy with innovation goals.
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