Having failed to get any respite from the GST Council, the aviation maintenance, repair and overhaul (MRO) industry has decided to approach the Prime Minister's Office (PMO) for a reduction in the tax burden on the sector, currently levied at 18 per cent.
The MRO Association of India has warned that the industry could face a closure if the Goods and Services Tax (GST) "anomaly is not set right".
Founder secretary general of the association Pulak Sen said airlines were finding it cheaper to send their aircraft overseas for maintenance although they cost more. He said the cost benefit that the MRO industry enjoyed because of low cost of labour in India -- USD 20 to USD 35 an hour -- had been eroded due to the GST burden.
He referred to countries such as Singapore and Malaysia where GST is levied at 7 per cent and Sri Lanka which does not levy any tax at all on the industry.
"MRO Association of India will once again appeal to the Ministry of Civil Aviation and Finance Ministry to re-consider our appeal and will approach the PMO directly this time," Sen told PTI.
On April 16, the Economic Adviser to the Ministry, Vandana Aggarwal, had hinted at a steep cut in the GST rate and said they were in touch with the Finance Ministry on the matter.
"The Ministry has been supportive to the MRO Association of India's request to set right the GST burden that the Indian MRO industry has been facing since the GST regime came into force. In the last two GST Council meetings, the Ministry actively persuaded the GST Council to consider the MRO industry's plea, however, till now there is no respite," he said.
According to the association, with 500 commercial aircraft in the Indian airline fleet at present, the value of MRO work is estimated to be around USD 900 million. The value of MRO work will touch USD 1.75 billion in the coming years when another 1,000 aircraft are added to the fleet strength.
"But the industry can suffer tremendously if things remain same," Sen said.
The major growth engine in the aviation sphere will be Asia, especially China and India, which will become the largest region, nearly doubling in-service fleet and related MRO demand. Hence a reduction in the GST slab would not only be in the interest of the MRO sector, but for the nation as well, the association underlined.
In October last year, the MRO industry had made a representation to the Civil Aviation Ministry demanding protection from the GST.
While the exemption from customs duty on imports of spares and other materials gave a big boost to the industry, the GST offset the competitive advantage it had gained.
The airline industry spent about USD 950 million in 2016-17 in aircraft maintenance and serving and only 10 per cent of this business came to Indian MRO companies.
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