The government has set a uniform IGST rate of 5% on all aircraft and aircraft engine parts, effective July 15, to boost domestic maintenance, repair, and overhaul industry. IGST, or Integrated Goods and Services Tax, is levied on interstate transactions of taxable goods and services as well as on imports of goods and services.
Previously, the diverse GST rates ranging from 5% to 28% on aircraft components posed challenges such as an inverted duty structure and GST accumulation in MRO accounts. The new uniform rate eliminates such disparities, simplifies the tax structure, and fosters growth in the MRO sector, said Union Civil Aviation Minister Kinjrapu Rammohan Naidu.
The uniform 5% IGST rate aims to reduce operational costs, resolve tax credit issues, and attract investment. The move was recommended by the GST Council in its 53rd meeting last month.
"The Indian MRO industry is projected to become a $4 billion industry by 2030," Naidu said. "This policy change is a crucial step towards building a strong ecosystem for MRO services, driving innovation, and ensuring sustainable growth."
The demand for MRO services in India is anticipated to grow at a much faster rate than the rest of the world. The country provides highly qualified engineers with the capability of being trained for an array of technical MRO activities.
According to Niti Aayog, following securing the Indian aviation sector, domestic MRO companies could potentially expand into global markets, competing with established players in South and Southeast Asia, along with other international MRO hubs.
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