Government implements uniform 5% tax on aircraft, engine parts

New Delhi [India], July 16 (ANI): The Union Civil Aviation Ministry has announced a uniform 5 per cent Integrated Goods and Services Tax (IGST) rate on all aircraft and aircraft engine parts, effective July 15th, 2024, according to a press release of the Ministry of Civil Aviation.

Announced by Union Civil Aviation Minister, Kinjrapu Rammohan Naidu on Monday, the decision marks a strategic move to simplify the tax structure, eliminate disparities caused by varying GST rates ranging from 5 per cent to 28 per cent, and address challenges such as inverted duty structures and GST accumulation.

Commenting on this development, Naidu, said, “The introduction of a uniform 5 per cent IGST rate on MRO items is a major boost for the aviation sector. Previously, the varying GST rates of 5 per cent,12 per cent, 18 per cent, and 28 per cent on aircraft components created challenges, including an inverted duty structure and GST accumulation in MRO accounts. This new policy eliminates these disparities, simplifies the tax structure, and fosters growth in the MRO sector.”

The Union Minister applauded the efforts of the Ministry of Civil Aviation, Ministry of Finance, and other stakeholders who have worked diligently to achieve this policy adjustment recommended by the GST Council in its 53rd meeting on 22nd June 2024, the uniform 5 per cent IGST rate aims to reduce operational costs, resolve tax credit issues, and attract investment.

Highlighting the prospects, Rammohan Naidu stated, “Our vision is to transform India into a leading aviation hub. The Indian MRO industry is projected to become a $4 billion industry by 2030. This policy change is a crucial step towards building a strong ecosystem for MRO services, driving innovation, and ensuring sustainable growth.”

India’s aviation sector is expected to overtake China and the United States as the world’s third-largest air passenger market in the next ten years, by 2030, according to the International Air Transport Association (IATA).

Further, the rising demand in the sector has pushed the number of airplanes operating in the sector. The number of airplanes is expected to reach 1,100 planes by 2027.