MRO players hope high from budget, expect level playing field

Finance Minister Nirmala Sitharaman

New Delhi, Days ahead of the Union Budget, local maintenance, repair and overhaul (MRO) firms hope the government will provide level-playing field by bringing the taxes at par with neighbouring hubs such as Singapore, Dubai, Colombo and Kuala Lumpur.

Expectations are also high that Finance Minister Nirmala Sitharaman would announce lower import duty on spare parts and suggest directions for a favourable GST regime.

Official sources said that MRO players’ demand for lower tax and levies have been endorsed by the nodal Civil Aviation Ministry.

“The government focus has been on promoting local industry. So, we certainly hope that budget would give some relief to the MRO industry,” said an Aviation Ministry official without specifying the tax relief.

At present, all the four GST rates of 5, 12, 18 and 28 apply on import of various spare parts of the aircraft. The industry has demanded uniform lower rate across spare parts. The MRO industry has also sought lower GST for MRO services locally.

Currently, the Indian commercial airline fleet consists of around 685 aircraft held between 13 airlines and the MRO work amounts to about $1.2 billion. Nearly, 90 per cent of this work is going overseas due to high GST rates of 18 per cent.

MRO Association of India Secretary General Pulak Sen said that effective GST on MRO done abroad is discharged at the rate of 5 per cent (IGST on Import).

“However, when the identical service is performed by Indian MRO, GST is levied at 18 per cent, which discourages MRO business in India,” he said.

A domestic airline executive said that they were importing aircraft parts in pre-GST regime with no duty levied on it.

“Under GST, such import was made taxable at various rates. This has adversely impacted the financial position of local airlines,” he said referring to recommendations given by the Federation of Indian Airlines (FIA).

The MRO Association has maintained that India can exploit the tremendous potential of MRO industry by creating a fiscal environment that gives local players an advantage over its foreign competitors for a limited period of 5 years so that they are able to create the necessary infrastructure.

“Alternatively, the domestic aviation MRO industry should at least be provided a level playing field so that it can compete with foreign competitors and bring greater MRO business and associated jobs to India,” the industry body has said in a proposal to government.