New policy sets a uniform 5 percent IGST on aircraft parts, enhancing India’s MRO industry.
In a significant move to strengthen the domestic Maintenance, Repair, and Overhaul (MRO) industry and aviation sector, the government has announced a uniform 5 percent Integrated Goods and Services Tax (IGST) on imports of aircraft parts, components, testing equipment, tools, and tool-kits. This rate applies irrespective of their HSN classification, subject to specified conditions. The policy aims to enhance the competitiveness, innovation, and efficiency of India’s MRO sector.
Several steps have been taken to facilitate the establishment of MRO services in India, including policy, regulatory, and other incentives:
- As announced in the Union Budget 2024-25, the period for exporting goods imported for repairs has been extended from six months to one year. Additionally, the re-import time for goods under warranty has been extended from three to five years.
- New MRO guidelines announced on September 1, 2021, abolish royalties and introduce transparency and certainty in land allotments for MROs at Airports Authority of India (AAI) airports.
- GST on MRO services was reduced from 18 percent to 5 percent with full Input Tax Credit from April 1, 2020.
- Transactions sub-contracted by foreign Original Equipment Manufacturers (OEMs) to domestic MROs are treated as exports with zero-rated GST from April 1, 2020.
- Customs Duty on tools and tool kits has been exempted.
- Clearance processing of parts has been simplified.
- 100 percent Foreign Direct Investment (FDI) is permitted via the automatic route for MRO.
This information was provided by the Minister of State in the Ministry of Civil Aviation, Murlidhar Mohol, in a written reply to a question in Lok Sabha.
