Go Back26-Jun-2024
A revision of goods and services tax (GST) rules is likely to bring relief for India’s aircraft maintenance and repair industry which has for long been trying to take advantage of the booming aviation market in India.
Last week, the 53rd GST council recommended a uniform 5% tax on imports of parts, components, testing equipment, tools and toolkits of aircraft, irrespective of their HSN code.
HSN, or Harmonised System of Nomenclature, is an internationally acceptable numerical code used to classify products for taxation purposes.
Executives of the maintenance and repair and overhaul (MRO) industry said this revision would help clear ambiguities by customs over classification of raw materials.While the government had reduced GST on import by the MRO industry to 5% from 18% in 2020 as a measure to help the industry during Covid, there was confusion by the customs department with regards to multiple raw materials as they had a common HSN code with other materials.Raw materials like aircraft paints, speciality steel, nickel-based alloys, and aerospace grade aluminium are being taxed as non-aircraft parts, often leading to increased duty and tax.For instance, when an aircraft comes to the hangar of an Indian MRO for a periodic check, the airline often wants to change the carpet in the galley. These are specialised carpets which are not produced in India and have to be imported. In such a case, it attracts 12% duty similar to normal carpets, which increases the cost and makes the Indian MRO industry unattractive. Aircraft paint, a specialised product, is taxed at 18% like normal paint.Anand Bhaskar, managing director at Hosur, Tamil Nadu-based Air Works, which counts multiple Indian and global airlines among its customers, said the decision of the GST Council would help reduce ambiguity."The revision in GST norms by the government enhances the attractiveness and competitiveness of Indian MRO from a global standpoint. It should spur global investments to create an indigenous MRO ecosystem, which will eventually boost self-reliance for the sector," he said.As maintenance moves up the value chain from line and base maintenance to engines and component overhaul, component costs begin to progressively outweigh the labour costs, Bhaskar said. "At the same time, reduction in duties enables us to offer more competitive rates to our customers, enlarging our addressable market,” he added.Given India’s ideal geographical position, placed between major Asian and European countries, the government has been pushing measures which will facilitate the country to emerge as a passenger and aircraft MRO hub in the world.
Economic Times