In a landmark reform unveiled by the GST Council, the government has slashed the Goods and Services Tax (GST) on semiconductor components—including silicon wafers and related devices—from 12% to 5%, effective September 22, 2025. The move aims to bolster India’s semiconductor manufacturing ecosystem and strengthen its electronics supply chain.Reuters
What’s Changing?
- The rate for semiconductor inputs such as silicon wafers has been reduced to 5% GST, a major step toward improving affordability for chipmakers.
- This aligns with broader GST 2.0 reforms simplifying India’s indirect tax system into two main slabs—5% and 18%, along with a high 40% levy for luxury and sin goods.
Why It Matters
| Impact Area | Details |
|---|---|
| Semiconductor Firms | Lower procurement costs for critical components, improving margins and viability. |
| Electronics Sector | Reduction in component costs can translate to more affordable consumer devices. |
| Make in India Push | Enhances India’s appeal as a competitive manufacturing destination. |
| Economic Policy | Supports wider economic goals of self-reliance and tech ecosystem growth. |
Strategic Significance:
- This reduction is expected to lower input costs for chip manufacturers, helping India reduce reliance on imports and attract local and global investments.
- By making semiconductor parts more affordable, the policy supports the broader electronics manufacturing push advocated under the Make in India initiative
Broader GST Reform Context
- The GST overhaul simplifies the previous complex four-slab system into just two primary rates, streamlining tax structures across sectors.
- Items previously in higher tax brackets, including semiconductors, are now benefiting from lower rates to stimulate manufacturing and domestic demand.
