The Aviation MRO (maintenance, repair, and overhaul) wants the government to make a simple structure by either cutting down 18% GST on the aviation MRO sector or levy customs Duty on aviation that are serviced out of the country and exempts from contribution to GST.
The MRO Industry is quite upset and requested to the Aviation Ministry to scrap the 18% GST and make the sector exempted from GST. The main reason behind discarding the GST on MRO Industry is that GST imposition makes the servicing of aircraft costlier in the country compare to servicing out of India. The Aviation MRO Industry is planning to meet the Finance Minister regarding the same by the next week.
43rd GST Council Meeting Updates
- “To extend the same dispensation as provided to MRO units of aviation sector to MRO units of ships/vessels so as to provide level playing field to domestic shipping MROs vis a vis foreign MROs and accordingly:”
- “GST on MRO services in respect of ships/vessels shall be reduced to 5% (from 18%).”
- “PoS of B2B supply of MRO Services in respect of ships/ vessels would be location of recipient of service” Read Press Release
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The MRO Industry said in a request, “Zero rating for service tax/GST to Indian aviation MRO industry; or introduce customs duties equivalent to 25% to the value of the import of aviation MRO services.”
Industry representatives have explained that 18% of GST implementation on the MRO industry has run over the sector and created a competitive phase as an import of spares parts are not imposed with customs duty and Maharashtra which owns 80% of the Industry in the country has exempted from VAT (Value Added Tax).
Bharat Malkani, Vice President at Aviation MRO Industry of India said, “The airlines cannot get a refund for GST paid to us because there is no provision for refund available on economy class seats, which form a substantial part of the airline capacity in India.”
He further said, “Under the service tax regime, airlines used to get a refund, thus keeping the cost of servicing low. Also, pre-GST, we paid zero VAT on spares in Maharashtra and service tax on labour. Post-GST, it is 18% on a combination of spares and labour. However, imports are not taxed at all.”
Read Also: GST Refund Procedure Under Goods and Services Tax India
Malkani favoured that the reason behind overseas MRO gaining because GST implementation made it exempted from customs duty for bringing a plane and its spare parts in the country from out of India. He said, “If customs duty on imports of MRO was 18%, the government would collect $180 million annually. Indian MROs are paying 18% and all of us are in the red, as no one wants to place orders with us.”
Last year, in 2016, whopping $950 million is spent on aircraft maintenance, repair and overhaul and what Indian MRO Industry got is just 10% of the total business of MRO work.
Because of high tax imposition, the cost of MRO has increased and to escape from the GST tax burden, companies are sending their aircraft for servicing to Sri Lanka, Singapore, Nepal, Dubai, and China.
After GST rollout, the cost of operations has increased in many industries and so the aviation industry is also impacted badly by it.
