Seeking to bring down overall expenses in the domestic aviation sector, the Ministry of Civil Aviation has sought certain tax incentives for the maintenance, repair and overhaul (MRO) segment.
The much-awaited aviation policy, which has been taken back to the drawing board following some suggestions made by Prime Minister Narendra Modi, is expected to bolster the domestic aviation space which has high growth potential.
The ministry has pitched for certain tax incentives for the MRO segment to ensure that there are more such facilities in the country, an official said.
These include some exemptions related to customs duty and service tax, he added.
In this regard, a proposal has been submitted to the Finance Ministry.
According to the Civil Aviation Ministry official, the Finance Ministry is yet to take a decision.
Currently, domestic carriers carry out their MRO works overseas as not too many such facilities are available locally.
The official noted that there is an opportunity to capitalise on as the country's MRO market is estimated to be worth over USD 700 million.
One of the proposals is to provide a total of three-year exemption from customs duty for airlines with respect to utilisation of imported testing equipment, the official said.
While there is no customs duty on equipment imported in relation to MRO work, duty would be applicable in case it is not utilised for more than one year after import.
Apart from some exemption from applicability of customs duty and service tax, the Civil Aviation Ministry is also looking to have some kind of benefit in terms of VAT at the state level, the official said.
Certain provisions, including easing of international flying norm for domestic carriers, are expected to be reworked in the new civil aviation policy.
Existing norms allow only those Indian carriers to fly abroad who have completed five years of domestic operations besides a fleet of 20 aircraft.
The decision came after Prime Minister recently reviewed the draft policy and suggested some changes.
Meanwhile, a committee of secretaries would be set up soon to review the revised draft policy.
