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India Aviation Sector Tax Reforms

India’s Maintenance, Repair, and Overhaul (MRO) industry is poised for rapid growth, driven by a booming aviation sector and supportive government reforms, creating significant opportunities for U.S. businesses to enter and expand in the market.

Over the past decade, the Indian Aviation Sector has seen tremendous growth. The number of airports in India doubled from 74 in 2014 to 149 in 2024, with projections reaching 350-400 by 2047. While international markets have seen a 6% rise in total passenger traffic, India registered a 13% rise in domestic air traffic in FY 2023-2024. Further growth is expected to continue with the development of the new Navi Mumbai International Airport and the Noida Airport, serving Mumbai and New Delhi, respectively.

The number of aircrafts in India is also expected to increase. Indian aviation giant IndiGo currently operates over 350 aircrafts and has placed an order for 500 aircrafts with Airbus. Similarly, Tata Group-owned Air India has a fleet of both narrow-body and wide-body aircrafts consisting of Airbus A320s and Boeings 777/787, with more than 500 aircrafts on order, including 185 Boeings. Accordingly, the outstanding orderbook of the A320 family aircraft stand at nearly 1,000, with deliveries extending into the next decade.

With this surge in the aviation sector, the Indian MRO industry is poised for significant growth. This can be attributed, in part, to a series of recent reforms including:

  • Procedural Reforms in the National Civil Aviation Policy (NCAP) 2016 now allow foreign aircrafts to enter India for MRO services for a period of 6 months as opposed to the previous limit of 15 days (without any permission). 
  • MROs are no longer required to provide proof of their requirements of parts, or orders from their clients.
  • In July 2024, the Government of India announced a uniform Goods and Service Tax (GST) rate of 5% (from a 5%-28% range) on all aircraft and aircraft engine parts, bringing India’s MRO industry closer to global MRO best practices. 
  • Customs duties on tools and tool kits have been exempted, and clearance processing of parts has been simplified.
  • 100% Foreign Direct Investment is permitted via the automatic route for MRO services.

As a result, the Indian MRO industry is expected to be valued at $4 billion by 2030 from the current $2 billion according to Civil Aviation Minister Kinjarapu Rammohan Naidu. Further growth can also be expected from the Vision 2040: Roadmap for India strategic plan, where India aims to:  

  • Become a global MRO hub, handling nearly 90% of the MRO requirements of Indian carriers.
  • Generate at least 20% of MRO revenue from foreign-registered aircrafts.
  • Conduct nearly 90% of redelivery maintenance domestically.

As part of Vision 2040, TATA-Air India has now initiated the construction of an MRO Facility in Bengaluru with an initial investment of $166 million. This facility will be a 60% Air India and 40% Lockheed joint venture, where Air India will primarily service their Boeing fleet while Lockheed plans to service the Indian Air Force’s (IAF) fleet of C-130s.

For entry into the Indian market, U.S. companies should identify quality partners who know the business landscape well. Strategic planning, due diligence, and consistent follow-ups are the prerequisites for success in India.

U.S. companies may consider the following local trade show to showcase their technologies and to meet Indian companies: MRO XPO INDIA, March 26-27, 2025, New Delhi

U.S. companies can also refer to updated guidelines on export controls and license exceptions through online tools at: https://www.bis.gov/articles/license-exceptions

For conducting market research, finding the right local partner, or establishing a local presence, the Aerospace and Defense team at the U.S. Commercial Service India stands ready to assist you. For more information and opportunities in this area, please reach out to your local U.S. office or contact aerospace and defense sector team at the U.S. Commercial Service in India.