The Indian government is considering a proposal to scrap a 2.5% import duty on commercial business jets, potentially levelling the playing field for non-scheduled operators as there is no such tax on commercial airliners.
Introduced in 2007, the Basic Customs Duty (BCD) has reached the end of its intended tenure, reports the Hindustan Times. The Civil Aviation Ministry aims to equalise treatment between private and commercial jets. In December, it formally proposed to the Finance Ministry the elimination of import duties on private and business jets, two reliable sources told the newspaper. However, a decision was likely only after a new government was elected. India's 2024 general election is being held over six weeks between April 19 and June 1.
Apart from the 2.5% BCD, imports for Non-Scheduled Operators of Commercial Operations (NSOP) are also subject to a 10% Social Welfare Surcharge (SWS) on the BCD, plus a 5% Integrated Goods and Services Tax (IGST). Importing aircraft for private or personnel use - such as by corporations - attracts even higher levies of 3% BCD, 10% SWS on BCD, and 28% IGST.
The unequal tax system is often blamed for the country's stagnant number of non-scheduled operators, which has been between 100 and 120 over the past 15 years. Data from the Directorate General of Civil Aviation (DGCA) shows 381 jets and helicopters were registered with 112 non-scheduled operators in India as of December 2023.
A senior executive of Club One Air told the Moneycontrol news site that removing the import tax would greatly boost the industry as demand for private planes in India is surging. According to Club One Air, domestic air passenger traffic for business aircraft or private jets has grown 150% since 2021, paralleling India's booming domestic air passenger traffic since the pandemic. The executive said various organisations contemplated purchasing business jets to meet commercial aviation demands. A senior executive from private jet aggregator JetSetGo said at least 30% of its customer base consisted of new customers in the past two years.
Still, industry experts cited various other challenges hindering the business aviation industry's growth in India. These included unclear import policies, inadequate airport infrastructure, high fuel costs, insufficient aircraft maintenance facilities, and a shortage of trained pilots and staff.
"Policy consistency is key for the private business jet industry to bloom in India. But just last year, the government was looking to curb 'non-essential imports' of certain kinds of aircraft, which left the industry in shock," a senior industry expert told Moneycontrol.
The JetSetGo executive said the DGCA's norms for importing private jets into the country were harsh compared to markets like Dubai, Singapore, and China. "The entire process of importing a private aircraft to India is a time-consuming, tedious, and challenging one, even through the government's GIFT City (Gujarat International Finance Tec-City), where companies are offered a tax holiday on the capital gains of aircraft leasing," he said.
Another industry expert told Moneycontrol that Indian companies also found it difficult to operate a business jet in India while having the aircraft registered on a foreign aircraft register. The DGCA has been clamping down since 2018 on corporates using this loophole.
According to Moneycontrol, the chartered plane industry in India wants the government to reduce customs charges on imports, simplify the import process, and address high fuel costs. However, hopes are high that removing the import duty will not only boost corporate purchases of business aircraft but also help boost connectivity within the country.
"New smaller airports that have been inaugurated across India are a massive opportunity for the chartered flight industry in the country, and reducing import duty on planes will help the industry get more planes to meet the opportunity," the Club One Air executive said.
