Government implements uniform 5% GST on all aircraft and aircraft engine parts to boost India as a leading aviation hub

The Ministry of Civil Aviation has announced a uniform 5% Integrated Goods and Services Tax (IGST) rate for all aircraft and aircraft engine parts, effective from July 15th, 2024.

Reflecting on this development, Naidu commented, "The introduction of a uniform 5 per cent IGST rate on MRO items is a major boost for the aviation sector. Previously, the 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."

Union Civil Aviation Minister Kinjrapu Rammohan Naidu disclosed this decision on Monday, emphasising its strategic intent to streamline the tax regime by eliminating the disparities caused by varying GST rates ranging from 5% to 28%. The move addresses challenges such as inverted duty structures and GST accumulation.

The Union Minister commended the efforts of the Ministry of Civil Aviation, Ministry of Finance, and others in diligently implementing this policy adjustment, which the GST Council recommended during its 53rd meeting on June 22, 2024.

The uniform 5% IGST rate underscores India's ambition to become a leading aviation hub by reducing operational costs, addressing tax credit issues, and attracting investments.

Highlighting future prospects, Rammohan Naidu emphasised, "Our vision is to transform India into a leading aviation hub. The Indian MRO industry is projected to become $4 billion by 2030. This policy change is crucial to 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 poised to become the world's third-largest air passenger market by 2030, surpassing China and the United States. The sector's expanding demand is expected to increase the number of aircraft in operation to 1,100 planes by 2027 from the current fleet of 700, solidifying India's position as one of the fastest-growing major aviation markets.