Government Strengthens Regulatory Framework to Position India as a Global Aircraft MRO Hub

The Government has announced a series of policy, regulatory and fiscal measures to strengthen India’s Maintenance, Repair and Overhaul (MRO) sector, with the objective of creating a globally competitive domestic MRO ecosystem, attracting private investment and reducing foreign exchange outflow arising from overseas aircraft maintenance.

The reforms seek to improve the ease of doing business for MRO operators through changes to the regulatory framework governing land allotment, taxation, customs duties and infrastructure development.

The revised MRO Guidelines, issued on 1 September 2021, abolished royalty payments for MRO facilities established at Airports Authority of India (AAI) airports, introduced greater transparency and certainty in the allotment of land for MRO operations, and permit extension of land lease agreements by an additional 15 years after completion of the initial 15-year lease period, thereby providing greater long-term operational certainty for MRO operators.

To improve the competitiveness of the domestic aerospace and MRO industry, the Integrated Goods and Services Tax (IGST) on imports of aircraft components and aircraft engine parts has been reduced to 5%. Further, the GST applicable to MRO services has been reduced from 18% to 5%, with the benefit of full Input Tax Credit (ITC). In addition, MRO services subcontracted by foreign Original Equipment Manufacturers (OEMs) and overseas MRO companies to domestic MRO entities are treated as zero-rated exports under the GST framework.

Under the Union Budget 2024-25, the permissible period for export of goods imported for repair has been extended from six months to one year, while the time limit for re-import of goods sent abroad for repairs under warranty has been increased from three years to five years. These measures are intended to facilitate cross-border repair operations and improve operational flexibility for MRO service providers.

The Addendum to the MRO Guidelines, 2026, issued on 20 February 2026, introduces a moratorium period and rent-free period for MRO operators constructing new hangars at AAI airports. These incentives are designed to encourage investment in capital-intensive hangar infrastructure and expand domestic maintenance capacity.

The Union Budget 2026-27 introduced Nil Basic Customs Duty (BCD) on aircraft components, including engines, used in aircraft manufacturing and the manufacture of aircraft parts. The exemption from Basic Customs Duty on parts, testing equipment, tools and tool-kits used for aircraft MRO operations has also been extended until 31 March 2028, reducing input costs for domestic MRO providers.

The policy measures have been accompanied by continued private sector investment in the sector. Notably, Safran Aircraft Engine Services India (SAESI) has established an aircraft engine MRO facility in Hyderabad with an investment of approximately Rs. 1,300 crores, reinforcing India’s growing role as a destination for advanced aircraft maintenance services.

Collectively, these reforms represent a comprehensive policy framework to strengthen India’s aircraft maintenance capabilities by reducing operational costs, improving regulatory certainty, encouraging infrastructure investment and enhancing the competitiveness of the domestic MRO sector.