Presentation on theme: "Presentation: Taxation and Custom duties impeding MRO Growth MRO INDIA 2011 CONFERENCE 17 March 2011 Bombay Exhibition Centre, Hall No.2, Mumbai Max AeroSpace."— Presentation transcript:
Presentation: Taxation and Custom duties impeding MRO Growth MRO INDIA 2011 CONFERENCE 17 March 2011 Bombay Exhibition Centre, Hall No.2, Mumbai Max AeroSpace & Aviation Ltd.
2 INDEX Company brief Our Focus Growth of commercial Aircraft Fleet Indian aviation & MRO sector Indian MRO sector scenario Deterrents to growth of Indian MRO sector Taxes: Deterrent to growth of Indian MRO Inconsistent Policies Sectoral impact on Indian MROs Benefits to Foreign MROs Impact Mitigation Summary
Max AeroSpace & Aviation Ltd.3 COMPANY BRIEF Founded as an aviation engineering services organization in 1994. Approvals: –DGCA CAR 145 –EASA 145 –CEMILAC –DGAQA –Ministry of Defence, Govt. of India Key Pointers –Hangar and workshops at Juhu Aerodrome –Accredited by reputed international Aviation OEMs –Currently building a integrated facility at MIHAN, Nagpur Customers: –Jet Airways, Kingfisher, Indigo, Air France, Air India, SpiceJet –Indian Air Force, Indian Coast Guard, Indian Navy, HAL –Boeing, IAI, ELBIT, Lockheed Martin, Rockwell Collins, Sikorsky, Embraer, KAI
Max AeroSpace & Aviation Ltd.4 Aircraft & component MRO Engineering & manufacture of licensed products for Defence applications Mission system installation OEM support: - Warehousing - After- market support - Total Offsets solutions OUR FOCUS
Max AeroSpace & Aviation Ltd.5 GROWTH OF COMMERCIAL AIRCRAFT FLEET
Max AeroSpace & Aviation Ltd.6 INDIAN AVIATION & MRO SECTOR Industry on an upswing. Boeing estimates: Additional 500 aircraft in the coming decade (conservative) Engineering and maintenance: Key to bottom line drivers Development of MRO sector: Civil: Impact on cost drivers Military: Strategic MRO market size: Est. US $600 Million. Expected growth 20% annually
Max AeroSpace & Aviation Ltd.7 INDIAN MRO SECTOR SCENARIO Aviation Engineering is a complex and long gestation period industry Airborne systems traditionally repaired and serviced abroad World over, Aircraft parts exempted from Customs duty, GST, VAT & Service Tax Payment to foreign MROs under PBH are out of the service tax incidence Local MRO industry face discriminatory tax position against foreign players!
Max AeroSpace & Aviation Ltd.8 DETERRENTS TO GROWTH OF INDIAN MRO SECTOR Lack of reciprocity: - Bilateral regulations: EASA FAA JAA - Parts manufacturing Taxes and Levies Military MRO: Restricted to DPSU participation No government funding for private sector military program
Max AeroSpace & Aviation Ltd.9 TAXES: DETERRENT TO GROWTH OF INDIAN MRO ParticularsIndian MROForeign MRO Labour100.00 Spares100.00 Sub Total200.00 Avg. Customs duty @ 24% (On Spares & Materials) 24.00 Octroi @ 5.5% (if applicable) 7.15- VAT @12.5% (On Aircraft Spares) 18.40 Service tax @ 10.30% (On Labour) 10.30- Airport Royalties @13% on GTO 26.00 Grand Total285.85200.00 Disparity in tax incidence on the Indian MROs v/s. foreign MROs on the identical / similar nature of transaction. 43% overall Cost Benefit to Foreign MROs.
Max AeroSpace & Aviation Ltd.10 INCONSISTENT POLICIES Recent Budget proposal to levy MAT on SEZ units - @ 18.5% of Book Profit Will hit hard on upcoming MRO projects in SEZ No support to promote MRO sector, a 100% import substitute and foreign exchange saver Need for allocation of funds for development of infrastructure for MRO in initial stage
Max AeroSpace & Aviation Ltd.11 SECTORAL IMPACT ON INDIAN MROs Deterrent to establishment of local MROs Detrimental to viability, sustainability and growth of the domestic aviation sector Loss of opportunity for entry of entrepreneurs into sunrise industry sector Loss of Forex Indian MROs uncompetitive
Max AeroSpace & Aviation Ltd.12 BENEFITS TO FOREIGN MROs Zero Tax impact Preferential big brother treatment Preference by DPSUs Funded by foreign governments as military MRO is deemed strategic
Max AeroSpace & Aviation Ltd.13 IMPACT MITIGATION Identical tax norms for Indian and foreign MRO companies Incentives to Indian MRO organizations under Tax Provisions Equal opportunity for Indian licensed companies to take part in tender process
Max AeroSpace & Aviation Ltd.14 SUMMARY High growth domestic Aircraft industry Demand driver is sheer volume of aircraft being inducted Outsourcing to third party MRO: The new paradigm European MROs have started outsourcing jobs to Asia and Latin America where labour costs are significantly lower Government must realise that Indian MRO cannot compete unless there is a level playing field Efforts needed by all operators and stake holders to come together to ensure survivability and sustainability of this industry