On Monday (July 15), the Indian government has introduced a new uniform 5% Integrated Goods and Services Tax (IGST) rate on all aircraft and aircraft engine parts to stimulate the domestic maintenance, repair and overhaul (MRO) industry. According to REUTERS news agency, the decision, which is effective immediately, is described as a crucial step forward for the MRO sector, with the aim of positioning India as a prominent global aviation hub, according to an official statement.
“The introduction of a uniform 5% IGST rate on MRO items is a major boost for the aviation sector,” Union Civil Aviation Minister Kinjrapu Rammohan Naidu said in the release. Previously, IGST rates on all aircraft and engine parts varied between 5% and 28%. During its 53rd meeting on June 22, the GST Council proposed a consistent 5% IGST rate. This adjustment aims to lower operational expenses, address tax credit complexities and enhance investment attractiveness. Previously, differing GST rates of 5%, 12%, 18% and 28% on aircraft components posed challenges such as inverted duty structures and GST accumulation in MRO accounts, noted Naidu.
Naidu expressed the government's aspiration to elevate India into a premier aviation centre, noting that the Indian MRO industry is forecasted to reach US$4 billion by 2030. “This policy change is a crucial step towards building a strong ecosystem for MRO services, driving innovation and ensuring sustainable growth,” Naidu emphasised.
