The Union Government has permitted 100 per cent Foreign Direct Investment (FDI) via automatic route for aircraft maintenance, repair and overhaul (MRO).

In a written reply in the Lok Sabha, Minister of State in the Ministry of Civil Aviation Murlidhar Mohol said in a major boost to the domestic MRO industry and the aviation sector, the government has announced that a uniform rate of 5 per cent IGST will apply to imports of parts components, testing equipment, tools and tool-kits of aircraft, irrespective of their HSN classification subject to specified conditions.

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Mohol said this policy change is a crucial step towards enhancing the competitiveness of the Indian MRO sector, fostering innovation and efficiency and creating a robust and efficient aviation sector.

“The government has taken several steps to facilitate setting up of aircraft maintenance, repair, and overhaul services in India through various policy, regulatory and other incentives which include 100 per cent Foreign Direct Investment permitted via automatic route for MRO,” the minister said.

Elaborating further, Mohol said as part of the announcements made in the Union Budget 2024-25, the period for export of goods imported for repairs has been extended from six months to one year. Also, the time limit for re-import of goods for repairs under warranty has been extended from three to five years.

New MRO Guidelines announced on September 1, 2021, inter alia abolish royalties and build in transparency and certainty in land allotments for MROs in AAI airports.

The GST on MRO has been reduced from 18 per cent to 5 per cent with full Input Tax Credit from April 1, 2020.

Transactions sub-contracted by foreign original equipment manufacturers (OEMs)/ MRO to domestic MRO are treated as ‘exports’ with zero-rated GST from April 1, 2020

Exempted Customs Duty on tools and tool kits and Simplified clearance processing of parts.