New aviation policy: How airlines are set to benefit

By: |
Mumbai | Published: June 16, 2016 6:36:24 AM

Move may propel domestic airlines to maintain aircraft within country

The aircraft maintenance, repair and overhaul (MRO) sector in India stands to benefit from the country’s new aviation policy as the sector has been given exemption from paying taxes like customs duty, airport royalty and value added tax (VAT), which may propel the domestic airlines to maintain the aircraft within the country.

According to the policy, the ministry of civil aviation (MOCA) will try to persuade the state governments to not levy any value added tax on the activities of the MRO sector in the respective states.

The policy also enumerates that provision for adequate land for MRO service providers will be made in all future airport and heliport projects where potential for such MRO services exists. According to aviation experts this can be an exciting development for the sector as the allocation of space for maintenance and repair of aircrafts in the future airports can make life easier for the airlines and reduce the cost.

“Sub-sectors like MRO, Cargo, helicopters, general aviation and Make in India will get a fillip with liberalised operational norms and tax breaks,” Amber Dubey, partner and head, aerospace and defense, KPMG in India, said
In another game changing move the Union government has decided that airport royalty and additional charges will not be levied on MRO service providers for a period of five years from the date of approval of the policy.

As of now the MROs have to pay hefty amount in the form of airport royalty and other taxes which if exempted may boost the sector. “This is the first time we have a comprehensive aviation policy and this should have a positive impact on the sector in India. Involving state governments through commitments on providing free services and low taxes to these low cost airports and lower level of taxation on MRO will also help the sector grow,” said Dhiraj Mathur, partner – Aerospace and Defence, PwC.

The union government has been trying to focus on the MRO sector as jobs in the sector have been going to countries like Sri Lanka, Singapore and other Gulf countries. Most of the domestic airlines maintain their aircrafts outside India.

According to the government, the MRO business of Indian carriers is around R5,000 crore, 90% of which is currently spent outside India. In the Union Budget, the government announced that the sector will be exempted from paying customs and service tax.

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