UNIFORM 5% TAX ON PLANES AND ENGINE PARTS TAKES FLIGHT IN INDIA

Minister Naidu announced a standardized 5% IGST rate on aircraft parts to simplify the tax structure, reduce costs, and attract investment in the aviation sector.

The Union Civil Aviation Ministry has announced a uniform 5% Integrated Goods and Services Tax (IGST) rate on all aircraft and aircraft engine parts, effective July 15th, 2024. This decision, announced by Union Civil Aviation Minister Kinjrapu Rammohan Naidu, represents a significant step towards simplifying the tax structure within the aviation sector. Previously, varying GST rates on aircraft components ranged from 5% to 28%, leading to challenges such as inverted duty structures and GST accumulation in Maintenance, Repair, and Overhaul (MRO) accounts.

Minister Naidu emphasized the positive impact of this policy change on the aviation industry, stating, “The introduction of a uniform 5% IGST rate on MRO items is a major boost for the aviation sector. Previously, the varying GST rates of 5%, 12%, 18%, and 28% on aircraft components created challenges, including an inverted duty structure and GST accumulation in MRO accounts. This new policy eliminates these disparities, simplifies the tax structure, and fosters growth in the MRO sector.”