The Indian government has introduced a uniform 5% Integrated Goods and Services Tax (IGST) on all aircraft and aircraft parts. This new policy, effective from July 15, 2024, aims to streamline the tax system. And support the growth of India’s Maintenance, Repair, and Overhaul (MRO) industry, positioning the country as a global aviation hub.
A Simplified Tax Structure
Civil Aviation Minister Kinijrapu Rammohan Naidu announced the policy during a recent press conference. He explained, “All aircraft and aircraft engine parts will now have a 5% IGST rate, including imports. This change eliminates tax disparities and simplifies the tax structure, giving a major boost to the MRO sector.”
Previously, the industry faced a complex tax landscape with varying GST rates ranging from 5% to 28% on different aircraft components. This inconsistency made tax calculations challenging and led to GST credit accumulation.
Government’s Strategic Initiative
The GST Council recommended this policy change on June 22, 2024, and it was quickly approved by the Ministry of Civil Aviation and the Ministry of Finance. The new 5% IGST rate will apply to all aircraft parts, components, testing tools, equipment, and tool kits, reducing operational costs and simplifying tax compliance. The uniform tax rate will attract investment and spur business growth in the MRO sector.
Industry’s Positive Response
The aviation industry has welcomed this initiative, recognizing its potential to enhance the competitiveness of India’s MRO sector globally. A standardized tax rate will help build a strong domestic MRO ecosystem, encouraging investment and business expansion.
Conclusion
As India continues to grow as a major aviation market. In 53rd GST Council Meeting the government’s efforts to support the MRO industry are expected to yield positive results. The uniform 5% IGST policy not only simplifies taxation but also sets the foundation for sustained growth in the Indian aviation sector.
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