Government permits 100% Foreign Direct Investment via automatic route for Aircraft Maintenance, Repair and Overhaul (MRO)

In a significant boost to the domestic Maintenance, Repair, and Overhaul (MRO) industry and the aviation sector, the Government has announced a uniform 5% IGST rate on imports of aircraft parts, components, testing equipment, tools, and toolkits, regardless of their HSN classification, subject to specified conditions. This policy change aims to enhance the competitiveness of the Indian MRO sector, fostering innovation, efficiency, and a robust aviation sector.

The government has implemented several measures to facilitate the establishment of aircraft MRO services in India through various policies, regulations, and other incentives. In the Union Budget 2024-25, the period for the export of goods imported for repairs has been extended from 6 months to 1 year. The time limit for re-importing goods for repairs under warranty has been extended from 3 to 5 years. New MRO Guidelines, announced on September 1st, 2021, abolished royalties and introduced transparency and certainty in land allotments for MROs at AAI airports. GST on MRO services was reduced from 18% to 5% with full Input Tax Credit from April 1st, 2020. Transactions sub-contracted by foreign Original Equipment Manufacturers (OEMs) to domestic MROs are treated as 'exports' with zero-rated GST from April 1st, 2020. Additionally, Customs Duty on tools and tool kits has been exempted, clearance processing of parts has been simplified, and 100% Foreign Direct Investment is permitted via the automatic route for MRO services.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.