NEW DELHI: In a major development for the Indian aviation sector, the central government has allowed 100% Foreign Direct Investment (FDI) via the automatic route for aircraft Maintenance, Repair, and Overhaul (MRO) services. This move aims to bolster the domestic MRO industry, promoting innovation and efficiency within the sector.

The announcement also includes the implementation of a uniform 5% Integrated Goods and Services Tax (IGST) on imports of aircraft parts, components, testing equipment, tools, and toolkits. This tax rate applies regardless of their HSN classification, subject to specific conditions. This policy is expected to enhance the competitiveness of the Indian MRO industry and contribute to the growth of a robust aviation sector.

Minister of State for Civil Aviation, Shri Murlidhar Mohol, shared this information in a written reply to a question in Lok Sabha.

To further support the MRO sector, the government has introduced several initiatives:

Extended Export and Re-import Periods: The Union Budget 2024-25 extends the export period for goods imported for repairs from six months to one year. Additionally, the re-import period for goods under warranty repairs has been extended from three to five years.

MRO Guidelines of 2021: New guidelines effective from September 1, 2021, eliminate royalties and ensure transparency in land allotments for MROs at Airports Authority of India (AAI) airports.

Reduced GST on MRO Services: From April 1, 2020, GST on MRO services was reduced from 18% to 5%, with full Input Tax Credit available.

Zero-Rated GST for Subcontracted Transactions: Transactions subcontracted by foreign Original Equipment Manufacturers (OEMs) or MROs to domestic MROs are treated as 'exports' and are zero-rated for GST from April 1, 2020.

Customs Duty Exemption: Tools and toolkits are exempted from customs duty.

Simplified Clearance Processes: Clearance processing for parts has been simplified to expedite operations.

100% FDI via Automatic Route: Full foreign investment is now permitted automatically for the MRO sector.

These measures collectively aim to attract foreign investment, streamline operations, and enhance the global competitiveness of India's MRO industry.

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