India boosts MRO industry with 5% uniform tax on aircraft parts

Government introduces a 5 % uniform tax on all aircraft and engine parts to boost the domestic MRO industry. This policy change is a crucial step towards building a strong ecosystem for MRO services, driving innovation, and ensuring sustainable growth.

Image Credit: Freepik

The government has implemented a new uniform 5% Integrated Goods and Services Tax (IGST) rate on all aircraft and aircraft engine parts, effective immediately. This move aims to boost the domestic Maintenance, Repair, and Overhaul (MRO) sector and position India as a key global aviation hub. 

The GST Council, during its 53rd meeting on June 22, proposed a consistent 5% rate to reduce operational costs, simplify tax credit issues, and attract more investment.

Previously, IGST rates for these parts varied from 5% to 28% (5%, 12%, 18%, and 28%). The former varied rates created challenges such as inverted duty structures and GST accumulation in MRO accounts. 

Union Civil Aviation Minister Kinjrapu Rammohan Naidu said, “This new policy eliminates these disparities, simplifies the tax structure, and fosters growth in the MRO sector.”

He further added, “This policy change is a crucial step towards building a strong ecosystem for MRO services, driving innovation, and ensuring sustainable growth.” 

The Union Minister highlighted that this change is expected to significantly benefit the aviation sector. The government aspires to transform India into a leading aviation center, with the MRO industry projected to reach US$ 4 billion by 2030. The ministry is optimistic that this initiative will enhance the competitiveness of India’s MRO sector, fostering innovation and efficiency to build a robust and effective aviation industry.