In a bid to boost the domestic MRO industry and make India an aviation hub, the government has announced the implementation of a uniform 5% tax (IGST) on all aircraft and aircraft parts.
While addressing a press conference, Civil Aviation Minister Kinijrapu Rammohan Naidu said that all aircraft and aircraft engine parts will be covered under a 5% IGST rate, effective from July 15, 2024. This includes all imports. “This will be a major boost for the aviation sector. The new policy eliminates disparities, simplifies the tax structure, and fosters growth in the MRO sector,” he added.
Earlier, different aircraft components were charged with varying GST rates between 5% and 28%, which made tax computations challenging for traders and resulted in an accumulation of GST in accounts. However, things will change with the introduction of a uniform tax in the sector.
The new tax policy was recommended by the GST Council on June 22, 2024, in its council meetings, to replace the existing tax system with uniform taxation, which will help reduce operational costs, simplify taxation, resolve credit issues, and boost the sector’s appeal for investment. It was examined and passed by both the Ministry of Civil Aviation and the Ministry of Finance last month.
The uniform tax rate will apply to all imports of aircraft parts, components, testing tools, equipment, and tool kits. It is expected to make taxes less challenging for the sector and will add to the growth of businesses engaged in the maintenance, repair and overhaul of aircraft.
With India being one of the fastest-growing aviation markets in the world, this positive move from the government has been welcomed and appreciated by the major industry players.
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In his speech, the Civil Aviation Minister said that this policy change will help build a strong domestic ecosystem for MRO services and prepare it for the projected industry growth in the coming years. This move will make the Indian MRO sector more competitive and appealing on the global platform, paving the way for a robust aviation sector.
