India Simplifies Aircraft Tax: Minister Kinjrapu Rammohan Naidu Announces Uniform 5% IGST

The Union Civil Aviation Ministry of India has introduced a uniform 5% Integrated Goods and Services Tax (IGST) on all aircraft and aircraft engine parts, effective from July 15, 2024. This announcement was made by Union Civil Aviation Minister Kinjrapu Rammohan Naidu on Monday.

The new tax policy aims to simplify the tax structure, eliminate disparities caused by varying GST rates, and address challenges such as inverted duty structures and GST accumulation. Previously, GST rates on aircraft components ranged from 5% to 28%, creating several challenges for the Maintenance, Repair, and Overhaul (MRO) sector.

Minister Naidu stated, “The introduction of a uniform 5% IGST rate on MRO items is a major boost for the aviation sector. This new policy eliminates disparities, simplifies the tax structure, and fosters growth in the MRO sector.”

The policy adjustment, recommended by the GST Council in its 53rd meeting on June 22, 2024, is expected to reduce operational costs, resolve tax credit issues, and attract investment. Naidu highlighted that the Indian MRO industry is projected to become a $4 billion industry by 2030, and this policy change is a crucial step towards building a strong ecosystem for MRO services, driving innovation, and ensuring sustainable growth.

According to the International Air Transport Association (IATA), India’s aviation sector is expected to overtake China and the United States as the world’s third-largest air passenger market by 2030. The number of airplanes operating in the sector is expected to reach 1,100 by 2027.