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Presentation: Taxation and Custom duties impeding MRO Growth

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Title: Presentation: Taxation and Custom duties impeding MRO Growth


1
Presentation Taxation and Custom duties
impeding MRO Growth
Max AeroSpace Aviation Ltd.
MRO INDIA 2011 CONFERENCE 17 March 2011 Bombay
Exhibition Centre, Hall No.2, Mumbai
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

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

4
OUR FOCUS
  • Aircraft component MRO
  • Engineering manufacture of licensed products
    for Defence applications
  • Mission system installation
  • OEM support
  • - Warehousing
  • - After- market support
  • - Total Offsets solutions

5
GROWTH OF COMMERCIAL AIRCRAFT FLEET
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

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!

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

9
TAXES DETERRENT TO GROWTH OF INDIAN MRO
  • 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.

10
INCONSISTENT POLICIES
  • Recent Budget proposal to levy MAT on SEZ units -
    _at_ 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

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

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

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

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

15
Max AeroSpace Aviation Ltd.
Thank You
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