Union Budget 2015: Bring ATF under declared goods, expect MRO tax sops: CARE

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Moneycontrol Bureau

Aviation companies are hoping for tax incentives for maintenance, repair and overhaul (MRO), in the upcoming Union Budget, says rating agency CARE in its report on pre-Budget expectations of various industries.

"Tax exemptions for MRO setting-up would be a direct step towards cost-cutting foralready bleeding airline sector. A lower tax-structure will also make the domesticindustry competitive with the foreign players," the CARE report says.

The Civil Aviation Ministry on its part has already pitched for the same and also called for easing of customs norms for the Indian MRO industry. The ministry believes this will make domestic units economically viable, while also giving a fillip to Prime Minister Narendra Modi's 'Make in India' campaign.

The industry too has made quite a few suggestions for the promotion of MRO sector, including lowering VAT on MRO activities, removal of service tax, 10-year tax holiday and abolition of central excise duty on MRO, among others.

At the moment the MRO market in India is costlier by around 30 percent, compared to places like Sri Lanka, Hong Kong, Singapore, China and Dubai due to 12 percent service tax charged from customers, resulting in Indian carriers getting their fleet overhauled in other countries due to lower costs there.

Finally, it would be a big help to the sector if Arun Jaitley notifies ATF as ‘declared good’ as it would help bring down airfares and help loss-making airlines such as SpiceJet improve their financial health. This is also on the wish list of aviation companies.

Domestic carriers have also been demanding the same so that VAT on ATF can be reduced to four percent. States such as Chhattisgarh, West Bengal, Madhya Pradesh and Jharkhand have already slashed VAT on ATF.