GST Concessional Rate Is Not Applicable On Maintenance And Repair Services Of Test-Bench Equipment For Aeronautics: AAR

The Karnataka Authority of Advance Ruling (AAR) has held that a concessional rate under GST is not applicable to maintenance and repair services of test-bench equipment for aeronautics.

The two-member bench of M.P. Ravi Prasad and Kiran Reddy T. have observed that the concessional rate of GST of 5% is applicable to only Maintenance, repair or overhaul services in respect of aircraft, aircraft engines, and other aircraft components or parts. The applicant is providing maintenance and repair services of test bench equipment (Mermoz system) which are used for testing the airworthiness of an aircraft. The equipment does not qualify to be an aircraft or an aircraft engine.

The applicant is a wholly owned subsidiary of Spherea Test & Services. The parent company sold two pieces of equipment (test benches for aeronautics cases) to their customer in India, and the pieces of equipment are currently with the Indian Air Force on an operational forward basis. The parent company has subcontracted certain services to the applicant with respect to the test benches.

The test benches are used to test and prove the airworthiness of the aircraft's equipment. Also, on detection of any errors, the test benches are used for determination and correction of the errors, which will ensure the safe flight of these aircraft.

The applicant has sought an advance ruling on the issue of whether the services provided by the company to its parent company relating to the test benches which are in the name of MRO services, be classified as Maintenance, Repair, or Overhaul services in respect of aircraft, aircraft engines, and other aircraft components or parts.

The AAR has held that the contract is for the maintenance and repair of the Mermoz system, which is used for testing the airworthiness of the aircraft. Therefore, the impugned services are relevant to the maintenance and repair services of instruments for testing the airworthiness of an aircraft.

Applicant's Name: Testmesures Spherea Solutions Private Limited

Dated: 02.12.2022

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