India’s Aviation Sector Gets a Boost with New 5% IGST Rate
Announcement by Union Civil Aviation Minister Kinjrapu Rammohan Naidu
On Monday, Union Civil Aviation Minister Kinjrapu Rammohan Naidu announced the implementation of a uniform Integrated Goods and Services Tax (IGST) rate of 5% on all aircraft and aircraft engine parts. This change is effective immediately and is expected to significantly boost the domestic Maintenance, Repair, and Overhaul (MRO) industry, positioning India as a global aviation hub.
Future Prospects
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.”
Policy Benefits
Naidu explained that the introduction of a uniform 5% IGST rate on MRO items is a major boost for the aviation sector. Previously, varying GST rates of 5%, 12%, 18%, and 28% 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.
Leadership and Support
The Union Minister highlighted the role of Prime Minister Narendra Modi’s visionary leadership in making this change possible. Naidu said, “Under the guidance of PM Modi, we are committed to the Atmanirbhar Bharat initiative. His support for transforming India into a leading aviation hub has been crucial in driving this policy forward.”
Naidu also applauded the efforts of the Ministry of Civil Aviation, the Ministry of Finance, and other stakeholders who worked to achieve this policy adjustment. Recommended by the GST Council in its 53rd meeting on June 22, 2024, the uniform 5% IGST rate aims to reduce operational costs, resolve tax credit issues, and attract investment.
