AviationTransport & MRO

GST on Aviation — Economy 5%, Business 12%, International 0%

Complete GST guide for aviation sector: domestic passenger transport (5%/12%), international flights (0%), MRO services (5% reduced rate), aircraft leasing, cargo, ground handling (18%), ATF exclusion from GST, and impact on airline operating costs.

5%

Economy Class (Domestic)

12%

Business Class (Domestic)

0%

International Flights

18%

Cargo (Domestic)

5% (IGST)

Aircraft Leasing

5%

MRO Services

18%

Airport Services

5%

In-flight Catering

Aviation Industry — GST Framework

Passenger Transport — Domestic

Economy class domestic flights: 5% GST (no ITC). Business class domestic flights: 12% GST (with ITC). This distinction is based on ticket price/class — not aircraft type. Charter flights: 18% GST. Helicopter joy rides: 18%. Air ambulance: exempt. Pilgrimage flights (Haj, Kailash Mansarovar under government scheme): exempt. Key: Airlines can claim ITC on business class collections but NOT on economy class — major cost impact for fleet planning.

International Flights — Export of Service

International air transport (both inbound and outbound): 0% GST — treated as export of service (Place of Supply outside India). This covers: India to abroad, abroad to India, and transit through India. Baggage charges on international flights: 0%. However, ancillary services sold separately IN INDIA (lounge access at Indian airport, domestic leg of international journey booked separately): taxable at applicable rate. Codeshare arrangements: 0% for international leg.

MRO — Maintenance, Repair & Overhaul

MRO services reduced to 5% GST (from 18%) — effective April 2020. This was a landmark change to make Indian MRO competitive vs Singapore/Dubai/Sri Lanka hubs. Covers: aircraft maintenance, engine overhaul, component repair, avionics servicing. Condition: MRO must be provided to aircraft registered in India OR aircraft that will depart India after MRO. Parts/components used in MRO: 5% concessional rate (under specific notification). India's MRO market: expected to grow from $1.7B to $4B by 2030 post-GST rationalization.

Aircraft Leasing & Import

Aircraft import (purchase): 0% customs duty + 5% IGST (concessional). Wet lease (aircraft + crew): 5% IGST on rentals. Dry lease (aircraft only): 5% IGST. Engine/parts import: 0% customs + 5% IGST. This concessional structure was introduced to promote GIFT City (Gujarat) as aircraft leasing hub — competing with Ireland/Singapore. Aircraft lessors operating from GIFT IFSC: additional benefits including no GST on inter-se leasing transactions within SEZ.

Airport Services & Ground Handling

Airport operator services (landing/parking/housing charges by AAI/private airports): 18% GST. Ground handling services: 18%. Cargo handling at airport: 18%. Passenger Service Fee (included in ticket): already part of ticket price, so same rate as ticket class. User Development Fee (UDF): 18%. Fuel throughput charges: 18%. Airport lounge access: 18%. Duty-free shops: exempt from GST (treated as exports). Advertising at airports: 18%.

Aviation Turbine Fuel (ATF) & Exclusions

ATF (jet fuel): OUTSIDE GST — subject to state VAT + excise. This is the airline industry's biggest pain point — ATF constitutes 35-40% of operating costs but no ITC available. Petroleum products (including ATF) were kept out of GST by the GST Council. States charge 20-30% VAT on ATF. Airlines have repeatedly demanded ATF inclusion in GST (would reduce fares 10-15%). Natural gas for airport operations: outside GST. Electricity for airport: outside GST (state levy).

Aviation — GST Rate Table

ItemHSN/SACGST RateNotes
Economy class (domestic)SAC 99645%No ITC for airlines
Business class (domestic)SAC 996412%ITC available
International passengerSAC 99640%Export of service
Air cargo (domestic)SAC 996518%Freight transport
Air cargo (international)SAC 99650%Export
MRO servicesSAC 99875%Reduced from 18% (2020)
Aircraft leasing (wet/dry)SAC 99735%IGST concessional
Charter/non-scheduledSAC 996418%Full rate
In-flight cateringSAC 99635%Bundled with ticket
Ground handling servicesSAC 996718%Airport operations
Flying trainingSAC 999218%Not exempt (commercial)
Air ambulanceSAC 99640%Exempt — healthcare

Frequently Asked Questions

Why is ATF (jet fuel) not under GST and how does it impact airfares?
Aviation Turbine Fuel was excluded from GST along with 4 other petroleum products (petrol, diesel, natural gas, crude oil) because states depend heavily on VAT revenue from these items. ATF currently faces: Central Excise (₹11,000/kl) + State VAT (20-30%, varies by state). Since ATF is outside GST, airlines CANNOT claim Input Tax Credit on fuel — their largest cost (35-40% of operations). If ATF were under GST at 18% or even 28%, airlines could claim ITC against output GST on tickets, reducing effective cost by 15-20%. Industry estimates: airfares would drop 10-15% if ATF came under GST. The GST Council has repeatedly deferred this decision due to state revenue concerns.
What is the GST on international flight tickets booked from India?
0% GST (zero-rated). International passenger transport is treated as 'export of service' under GST — Place of Supply is outside India. This applies to: (1) India to any foreign country (outbound), (2) Any foreign country to India (inbound — if ticket sold in India), (3) Transit through India on international journey. Important: If you book a DOMESTIC connecting flight separately (not on same PNR as international), that domestic segment is taxable at 5%/12%. But if domestic connection is on the SAME TICKET as international journey (single PNR), the entire journey is zero-rated. Airline ancillary services (seat selection, extra baggage) on international flights: also 0%.
How did the MRO GST reduction to 5% impact Indian aviation?
Before April 2020: MRO services were taxed at 18% GST, making Indian MRO uncompetitive. Airlines sent 90% of heavy maintenance work overseas (Singapore, Dubai, Sri Lanka, Malaysia) — estimated $600M+ annual revenue loss for India. After 5% GST: Indian MRO became cost-competitive with Asian hubs. Results: (1) Air India Engineering Services expanded capacity. (2) GMR Aero Technic established new facilities. (3) Tata-Lockheed Martin announced MRO investment. (4) Government target: 60% of Indian airline MRO done domestically by 2025 (from 10% in 2020). Additional benefit: parts/components used in MRO also reduced to 5% from 18/28%. The combined effect makes Indian MRO 15-20% cheaper than pre-2020 for airlines.
Is GST applicable on flight cancellation and refund charges?
Yes. Cancellation charges/fees deducted by airlines are TAXABLE — they are consideration for 'agreeing to refrain from an act' (deemed service under Schedule II of CGST Act). Rate: Same as original ticket class — 5% for economy, 12% for business class. Example: Economy ticket ₹5,000 → Cancellation fee ₹1,500 → GST on cancellation fee = ₹75 (5%). For international tickets: cancellation charges are also 0% (since the underlying service was zero-rated). Date change fees: same treatment as cancellation (taxable for domestic, zero-rated for international). No-show charges: taxable. Full refund (no penalty): no GST implications — original GST reversed by airline.

Aviation Billing — Multi-Rate Ticket & MRO Invoicing

Laabam.One handles economy/business class rate differentiation, international zero-rating, MRO concessional invoicing, and airport service GST with automatic SAC classification.

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