Lower GST rate on aircraft MRO to boost local business, say service operators

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Published: March 14, 2020 10:47:34 PM

The domestic aircraft Maintenance, Repair and Overhaul (MRO) industry on Saturday welcomed GST Council's decision to lower the GST rate to 5 per cent from 18 per cent

gst, gst councilThe industry had long been demanding a reduction in GST rates for a level-playing field vis-a-vis overseas MRO companies, who are taking away almost 95 per cent of the domestic business due to lower taxes.

The domestic aircraft Maintenance, Repair and Overhaul (MRO) industry on Saturday welcomed GST Council’s decision to lower the GST rate to 5 per cent from 18 per cent and said it will boost the local business.

The industry had long been demanding a reduction in GST rates for a level-playing field vis-a-vis overseas MRO companies, who are taking away almost 95 per cent of the domestic business due to lower taxes.

“The lowering of tax rate to 5 per cent will be a tremendous boost to the Indian MRO industry,” AirWorks Executive Director Ravi Menon told PTI.

Menon said that though he had not yet seen the notification, it is a welcome move, adding, “lower taxes will incentivise the MRO industry further in investing in developing infrastructure, capability and competence.”

Finance Minister Nirmala Sitharaman on Saturday said the GST Council has decided to reduce the GST on aircraft Maintenance, Repair and Overhaul (MRO) services from 18 per cent to 5 per cent with full Input Tax Credit and change the place of supply for B2B MRO services to the location of recipient.

“This change is likely to assist in setting up of MRO services in India,” Sitharaman said.

Stating that with this move the industry will now be on the way to make the country a global MRO hub, Bharat Malkani, Managing Director of Max Aerospace group said, “India would become aircraft manufacturer in the next 10 years. By that time we will have the required technology,” he said.

He said lower taxes would have “huge” impact on the industry as it will not only reverse the trend of business, which 5 per cent domestic and 95 per cent overseas, but also will at least double the business of the domestic operators going forward.

According to HR Jagganath, CEO of Air India’s MRO arm AIESL, the move will help the company forging partnerships with more OEMs. “Higher taxes were a big impediment for the Original Equipment Makers (OEMs) to give MRO business to us. Now with lower taxes, they will be more than willing to partner with us for MRO works,” he said.

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