Government Unveils Uniform 5% IGST for Aircraft Parts, Aims to Boost Aviation Sector

The Union Civil Aviation Ministry announced a uniform 5% IGST on aircraft and engine parts effective July 2024, aiming to streamline tax structure and attract investments. Minister Kinjrapu Rammohan Naidu underscored the initiative's role in resolving operational challenges and fostering growth in the MRO sector.

The Union Civil Aviation Ministry has declared a uniform 5% Integrated Goods and Services Tax (IGST) on all aircraft and engine parts starting July 15, 2024. The announcement, made by Union Civil Aviation Minister Kinjrapu Rammohan Naidu, is expected to simplify the tax structure and remove disparities caused by varying GST rates ranging from 5% to 28%.

Minister Naidu remarked that the introduction of a uniform IGST rate is a major advancement for the aviation sector. "Earlier, differentiated GST rates on aircraft components created several challenges, including an inverted duty structure and GST accumulation," he said. "This new policy eliminates these disparities, simplifies the tax structure, and fosters growth in the Maintenance, Repair, and Overhaul (MRO) sector."

The Union Minister praised the collaborative efforts of the Ministry of Civil Aviation, Ministry of Finance, and other stakeholders for achieving this policy change, recommended by the GST Council in its 53rd meeting on June 22, 2024. Highlighting future prospects, Naidu emphasized the vision to transform India into a leading aviation hub. He projected the Indian MRO industry to become a $4 billion sector by 2030, driving innovation and sustainable growth. The Indian aviation sector is set to become the world's third-largest air passenger market by 2030, overtaking China and the United States, according to IATA forecasts. The number of airplanes in operation is also expected to rise to 1,100 by 2027.

(With inputs from agencies.)