Indian Government Unveils MRO Tax Reforms

India’s Ministry of Finance has announced a series of tax reforms targeting growth in its domestic MRO industry.

The announcement made on Mar. 14 will see the goods and services tax applying to commercial and military maintenance activity reduced from 18% to just 5% with full input tax credit, aimed at lessening tax liability. 

An additional reform will see the supply of MRO services change to the location of the recipient, a move India’s finance minister Nirmala Sitharaman told local media it believes will help establish more MRO service providers in India.

India has made no secret of its plans to build a more competitive domestic MRO sector, with its current set up unbalanced with an estimated 95% of business being awarded to overseas service providers. Since 2014, prime minister Narendra Modi has pushed a “Make in India” program aimed at growing the country’s manufacturing industry and associated services.

While the government continues its efforts to sell debt-laden flag carrier Air India, its MRO affiliate, Air India Engineering Services, has ambitions to further establish itself as a third-party provider and earlier this month added repair capability for the Pratt & Whitney GTF engine.

Air Works, the country’s largest independent maintenance provider, is also growing its focus on the domestic market after stabilizing its finances and adding capacity in the form of a new maintenance base in Kochi last year.

Aviation Week’s Fleet & MRO Forecast projects a 5.1% compound annual growth rate for India from 2020 through to 2029. By the end of the decade, the same data predicts a $21.7 billion value for the industry.

James Pozzi

As Aviation Week's MRO Editor EMEA, James Pozzi covers the latest industry news from the European region and beyond. He also writes in-depth features on the commercial aftermarket for Inside MRO.