Talks with Fin Min on MRO tax exemption encouraging: Raju

Civil Aviation Ministry has asked Finance Ministry for several sops to give industry required boost

Finance Ministry has responded favorably to Civil Aviation Ministry's demand of service tax exemption as well as customs duty relaxation for MRO activities. Though a decision on this matter is yet to be taken, Civil Aviation Minister Ashok Gajapathi Raju today said talks between the two ministries have been encouraging.

"In this regard, the discussions with the Finance Ministry have been encouraging," the minister said on the sidelines of a seminar on Make In India in civil aviation sector. Additionally, he also requested the states to bring down the VAT (Value Added Tax), it would encourage the MRO industry.

In the draft civil aviation policy, ministry had proposed several sops in order to boost the industry. Proposed sops include zero service tax on MRO, services, infrastructure status for MRO resulting in extended tax breaks, simplification of import processes for aircraft spares, exemption on customs duty for maintenance tools and tool kits.

Raju said the tax break was important for reducing imports in the aviation sector. "So, we need to find a way where this activity (MRO) gets an exemption (from service tax) and the customs (duty) window is three years on spare parts," he said.

Maintenance, Repair and Overhaul (MRO) works of aircraft are mostly done overseas by local carriers as costs are high in India. Noting that for the aviation sector most of the things are dependent on imports, Raju said that even for routing checks of aircraft, the planes are being taken to Singapore, Dubai and Sri Lanka.

"We need to pull in the $700 million worth MRO business into India. We had consultations (with the Finance Ministry) and it looks encouraging on the issues of service tax and (increasing) the customs duty window from one year to three years," the minister said.