Aviation ministry to seek tax relief for MROs

NEW DELHI: The aviation ministry will seek some exemptions on the service tax for the aircraft maintenance, repair and overhaul (MRO) industry from the finance ministry on Friday, as it tries to make the nascent industry lucrative in India.

Aviation secretary Ashok Lavasa is scheduled to meet finance secretary Sumit Bose to discuss the issue of a possible relaxation on service tax levied on the MRO industry.

Currently, MROs in India charge their customers a 12% service tax, which affects their competitiveness when compared to the competitors in the Gulf and South East Asian regions.

“We see the MRO industry as an important sector for aviation as the number of airlines and aircraft grows in the country,” said a senior aviation ministry official.

“The aviation secretary will discuss with the finance secretary ways to relax the service tax that MROs are forced to charge. Over the past few years, the finance ministry has given number of relaxations to the maintenence, repair, overhaul sector, so we are hopeful they will this time also.”

According to a report from the civil aviation ministry in 2012, the MRO industry’s size is expected to increase to Rs 7,000 crore by 2020.

The MRO industry has been recipient of government sops over the last couple of years. In 2013-14, the government increased the time period for duty-free consumption or installation of parts and testing equipmentimported for MRO of aircraftby units engaged in such activities, for a year. In 2012-13, the government offered similar duty-free imports of aircraft spares.

Last month, the Reserve Bank of India also notified the MRO sector as an infrastructure sector which would help the industry access low cost loans via external commercial borrowing.

However, the industry has been asking for a relaxation on the service tax imposed on MRO services to increase the competitiveness of Indian MROs as compared to others in the region.