Government permits 100 per cent FDI for aircraft MRO

The GOI has announced that a uniform rate of 5 per cent IGST will apply to imports of parts, components, testing equipment, tools and tool-kits of aircraft, irrespective of their HSN classification. This policy change is a crucial step towards enhancing the competitiveness of the Indian Maintenance, Repair and Overhaul (MRO) sector, fostering innovation and efficiency and creating a robust and efficient aviation sector.

The Government has taken several steps to facilitate setting up of aircraft MRO services in India through various policy, regulatory and other incentives such as, the period for export of goods imported for repairs has been extended from six months to one year and the time-limit for re-import of goods for repairs under warranty has been extended from three to five years. New MRO Guidelines that abolish royalties and build in transparency and certainty in land allotments for MROs in AAI airports.

Additionally, the GST on MRO has been reduced from 18 per cent to 5 per cent with full Input Tax Credit from April 1, 2020. Transactions sub-contracted by foreign original equipment manufacturers (OEMs)/ MRO to domestic MRO are treated as 'exports' with zero-rated GST from April 1, 2020 along with Exempted Customs Duty on tools and tool kits, simplified clearance processing of parts and lastly, 100 per cent Foreign Direct Investment permitted via automatic route for MRO.