Ahead of Budget 2024, Centre implements uniform 5% IGST on all aircraft and engine parts nationwide

The government on Monday announced the implementation of a 5% uniform IGST rate on all aircraft and aircraft engine parts to boost the industry.

The decision, which comes into force with immediate effect, marks a significant milestone for the domestic Maintenance, Repair, and Overhaul (MRO) industry, aimed at making India a global aviation hub, an official release said.

Earlier, IGST rates on all aircraft and engine parts were ranging from 5% to 28%.

"The introduction of a uniform 5% IGST rate on MRO items is a major boost for the aviation sector," Union Civil Aviation Minister Kinjrapu Rammohan Naidu said in the release.

The GST Council, in its 53rd meeting on June 22, had recommended the uniform 5% IGST rate, the release said, adding that the move is aimed at reducing operational costs, resolving tax credit issues, and attracting investment.

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, Naidu stated.

"This new policy eliminates these disparities, simplifies the tax structure, and fosters growth in the MRO sector," he noted.

"We are committed to the Atmanirbhar Bharat initiative. Prime Minister Narendra Modi's support for transforming India into a leading aviation hub has been crucial in driving this policy forward," the minister said.

The government's vision is to transform India into a leading aviation hub, he said, adding that the Indian MRO industry is projected to become a USD 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," Naidu emphasised.

The ministry is confident that this move will significantly enhance the competitiveness of the Indian MRO sector, fostering innovation and efficiency and creating a robust and efficient aviation sector, the release said.