Govt eases taxes, rules to strengthen aircraft maintenance sector

The Centre has outlined a series of measures to strengthen India’s aircraft Maintenance, Repair and Overhaul (MRO) industry as it works towards meeting the target of fulfilling 90 per cent of the country’s MRO requirements domestically by 2040.

Minister of State for Civil Aviation Murlidhar Mohol told Parliament that the government had introduced policy reforms, tax incentives and regulatory easing to create a conducive business environment for MRO providers, including Air India Engineering Services Ltd, Max MRO and others.

A key step has been the introduction of a uniform 5 per cent Integrated Goods and Services Tax (IGST) on imports of aircraft parts, components, testing equipment, tools and toolkits, applicable across all Harmonised System of Nomenclature (HSN) codes, subject to specified conditions.

In the 2024-25 Union Budget, the time allowed for export of goods imported for repairs was extended from six months to one year, while the re-import window for goods under warranty was increased from three to five years.

New MRO guidelines issued on September 1, 2021, abolished royalties and brought greater transparency and certainty in land allotments at Airports Authority of India (AAI) airports. Earlier, in April 2020, the GST rate on MRO services was reduced from 18 per cent to 5 per cent with full input tax credit. Transactions sub-contracted by foreign Original Equipment Manufacturers (OEMs) to domestic MROs have since been treated as ‘exports’ with zero-rated GST. Customs duty on tools and toolkits has been waived and clearance procedures for parts have been simplified.

The sector also benefits from 100 per cent Foreign Direct Investment (FDI) under the automatic route.

Industry estimates project that India’s MRO market will grow at a compound annual growth rate (CAGR) of 8.9 per cent to reach $4 billion by 2031, outpacing the global average growth rate of 5.6 per cent. Officials say this expansion is expected to significantly boost employment and contribute to GDP growth in the coming years.