Govt permits 100% FDI via automatic route for aircraft maintenance, repair and overhaul
New Delhi: In a major boost to the domestic MRO industry and to the aviation sector, the Centre has announced a uniform rate of 5% IGST on imports of parts components, testing equipment, tools and tool-kits of aircraft, irrespective of their HSN classification subject to specified conditions.
This policy change is a crucial step towards enhancing the competitiveness of the Indian MRO sector, fostering innovation and efficiency and creating a robust and efficient aviation sector, Minister of State in the Ministry of Civil Aviation Murlidhar Mohol informed the parliament in a written reply to a question.
The government has taken several steps to facilitate setting up of aircraft Maintenance, Repair and Overhaul (MRO) services in India through various policy, regulatory and other incentives which include:
- As part of the announcements made in Union Budget 2024-25, the period for export of goods imported for repairs has been extended from six months to one year. Also, the time-limit for re-import of goods for repairs under warranty has been extended from three to five years.
- New MRO Guidelines announced on 1st September, 2021 inter alia abolish royalties and build in transparency and certainty in land allotments for MROs in AAI airports.
- GST on MRO has been reduced from 18% to 5% with full Input Tax Credit from 1st April, 2020.
- Transactions sub-contracted by foreign original equipment manufacturers (OEMs)/ MRO to domestic MRO are treated as 'exports' with zero-rated GST from 1st April, 2020
- Exempted Customs Duty on tools and tool kits
- Simplified clearance processing of parts
- Foreign Direct Investment up to 100% permitted via automatic route for MRO
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