Under the proposals being considered are custom and service tax exemptions from the Central government , whereas the states would have to pitch in by providing exemptions from value-added taxes and octroi.
Due to its geographical position, India can be leveraged as a hub for MRO operations. But the tax structure in the country is such that even Indian carriers today find it cheaper to fly their aircraft overseas for service and repair. MRO companies have to pay taxes to the extent of 40% for providing services in India.
MRO in India is estimated at $700 million but only 5-10% of the business is carried out within the country. Indian carriers today prefer to get their fleet serviced in places like Colombo, Singapore, Malaysia and Dubai due to the prevalent tax structure in the country, which makes MRO operations up to 50% costlier.
The industry is projected to double in size to clock business of $1-1.5 billion by 2020. Making the Indian MRO industry competitive would not just help airlines save on costs of sending their aircraft abroad for repair but also generate employment in the country.