Govt Permits 100% FDI Via Automatic Route To Bolster Domestic MRO Industry, Slashes IGST On Aircraft Imports To 5%

The government has unveiled a new policy, introducing a uniform 5% Integrated Goods and Services Tax (IGST) on imports of aircraft parts and related equipment. This move is aimed at boosting the domestic Maintenance, Repair, and Overhaul (MRO) sector, according to the Minister of State in the Ministry of Civil Aviation, Shri Murlidhar Mohol.

What Happened: The government’s new policy applies a flat 5% IGST on the import of aircraft parts, components, testing equipment, tools, and toolkits, irrespective of their HSN classification. This announcement came as a written response to a question in the Lok Sabha by Minister Mohol.

The government has been actively working towards facilitating the establishment of MRO services in India. As part of this initiative, the Union Budget 2024-25 extended the period for export of goods imported for repairs from six months to one year and the time limit for re-import of goods for repairs under warranty from three to five years.

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On September 1, 2021, the government announced new MRO guidelines, which abolished royalties and introduced transparency and certainty in land allotments for MROs in Airports Authority of India (AAI) airports. Additionally, the Goods and Services Tax (GST) on MRO has been cut down from 18% to 5% with full Input Tax Credit from 1st April 2020.

The government has also made transactions sub-contracted by foreign original equipment manufacturers (OEMs)/ MRO to domestic MRO as ‘exports’ with zero-rated GST from April 1, 2020. Furthermore, the government has exempted Customs Duty on tools and tool kits, simplified clearance processing of parts, and permitted 100% Foreign Direct Investment via automatic route for MRO.

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