Budget proposes VGF for seaplanes, customs duty exemption for components used in making planes

The Union Budget has proposed measures to boost air connectivity as well as the aviation manufacturing ecosystem in the country, which is one of the worlds fastest civil aviation markets. In addition, basic customs duty exemption will be provided for raw materials imported for manufacture of parts of aircraft to be used in maintenance, repair, or overhaul requirements by units in the defence sector.

The Union Budget has proposed measures to boost air connectivity as well as the aviation manufacturing ecosystem in the country, which is one of the world's fastest civil aviation markets. Presenting her ninth straight Budget, Finance Minister Nirmala Sitharaman announced various measures to boost tourism, including giving a push for seaplane operations. Also, basic customs duty exemption has been announced for components and parts required for the manufacture of civilian, training and other aircraft. This move assumes significance at a time when the government is seeking investments in the aviation space as part of larger efforts to boost the country's self-reliance. In addition, basic customs duty exemption will be provided for raw materials imported for manufacture of parts of aircraft to be used in maintenance, repair, or overhaul requirements by units in the defence sector. Ashish Chhawchharia, Partner and Aviation Industry Leader at advisory firm Grant Thornton Bharat, said these measures lower input costs across the aviation value chain, making aircraft acquisition and upkeep more affordable while strengthening domestic MRO (Maintenance, Repair and Overhaul) capability. ''With passenger traffic projected to reach 665 million annually by FY31, cost efficiency and local capacity are critical. The intent is clear to boost India's aircraft manufacturing and MRO industry and position India for a larger role in the global aviation sector,'' he noted. There is increased focus on boosting the country's aviation ecosystem, including MRO activities. ''Expansion in India's airport and air navigation infrastructure and a growing ancillary ecosystem, including Maintenance, Repair, and Overhaul (MRO) and leasing, are strengthening the sector. ''These developments, along with technology integration, positions civil aviation as a key driver of nationwide economic connectivity and integration,'' the Economic Survey for 2025-26 said last week. In her Budget speech on Sunday, Sitharman also said that to enhance last-mile and remote connectivity, and promote tourism, she was proposing to give incentives to indigenise manufacturing of seaplanes. ''A Seaplane VGF Scheme will also be introduced to provide support for operations,'' she said. VGF refers to Viability Gap Funding. To foster ease of living, the finance minister has also proposed to revise provisions governing baggage clearance during international travel to address genuine concerns of passengers. ''The revised rules will enhance duty-free allowances in line with the present day travel realities and provide clarity in temporary carriage of goods brought in or taken out,'' she said.

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