On Monday Civil Aviation Minister Kinjrapu Rammohan Naidu announced the implementation of a uniform Integrated Goods and Services Tax (IGST) rate of 5% on all aircraft and aircraft engine parts for the domestic aircraft maintenance, repair & overhaul (MRO) sector. In the upcoming Union Budget for 2024-25, industry stakeholders are seeking measures which will boost domestic aircraft component manufacturing.
The decision taken on Monday is aimed at boosting the domestic MRO sector which has for long struggled with an unfavourable tax structure which made them uncompetitive compared to their global peers.
“This move has been pivotal in addressing the previously varying GST rates of 5%, 12%, 18%, and 28% on aircraft components, along with the issues of inverted duty structure and GST accumulation in MRO accounts,” said Venkatesh Mudragalla, Co-founder, Jeh Aerospace, a manufacturer of precision aerospace and engine components.
“As we await the much anticipated Budget 2024, the industry is hopeful for similar progressive policies from the government that will reduce disparities, simplify the tax structure, and foster growth within the MRO sector,” said Mudragalla.
Over the last decade India has emerged as a hub for manufacturing of major aircraft and engine components wherein Indian companies have tied up with global majors such as Boeing, Airbus, among others.
“For starters, a PLI (production linked incentive) scheme for the manufacture of aircraft components and sub-assemblies with an emphasis on high “in country value addition” will be welcome. Measures such as tax breaks for Aerospace R&D (research & development) and systems development will also help.” said Aravind Melligeri, Chairman and Chief
Executive Officer at Aequs, which is engaged in aircraft component manufacturing.
“There is thus a need to ensure optimal fiscal mechanisms to make domestic Aerospace manufacturing more viable and attractive,” he added. So far PLI schemes have been introduced for 14 sectors which include drones and components, telecommunications, solar modules, chemical batteries, automobiles and components, among others.
The Union Budget for 2024-25 will be presented on the floor of the Parliament by Finance Minister Nirmala Sitharaman on Tuesday.