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Indian Aviation Service Taxes Criticized

by Mary Swire, Tax-News.com, Hong Kong

05 May 2010


The Indian ministry of finance has published a working paper which includes analysis of the tax and tariff system and its effect on the competitiveness of the aviation maintenance and repair sector, among other industries.

The paper addresses the issue of sales tax on aircraft parts imported by aircraft service companies. When a service centre imports aircraft parts into India, it pays import duty of 20-25%. Then, when it sells these parts to an aircraft operator, a sales tax/VAT of 10-13% is payable.

However if an aircraft operator directly imports aircraft parts, no sales tax/VAT is incurred and import duty is payable only if the parts imported are meant for a private aircraft.

Exemption from the sales tax applicable to imported aircraft parts sold by service centres to aircraft operators, only charging import duty if the parts are sold to private operators, would help service centres provide better support to customers, the paper contends.

Reducing the import duty on spare parts for aircraft, currently 20-25% for special tools and 30-35% for equipment, is also recommended by the paper.

The paper also looks at turnover tax levied by airport authorities on service centres; the 14% payable to airport authorities on revenue earned for air-side services is heavily criticized.

TAGS: tax | sales tax | India | aviation | import duty

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