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MoCA seek tax incentives for MRO under new aviation policy

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 $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, <g data-gr-id="43">duty</g> 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 <g data-gr-id="47">international</g> 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. 

Meanwhile, the Civil Aviation Ministry is working on options to address the issue of airlines charging high fares, especially during festive seasons, in the wake of serious concerns expressed by Prime Minister Narendra Modi on the issue but ruled out regulating ticket prices. 

Among the solutions to the problem the government is said to be working on is encouraging the use of unutilised bilateral rights with other countries that could lead to <g data-gr-id="45">higher</g> availability of seats and reduction in fares. Highly-placed sources said another option could be to induce competition by slashing of fares. A lead in this regard could perhaps be taken by the state carrier, they said. 
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