Nepal | November 13, 2019

Import of aircraft spare parts at one per cent

New Financial Act removes 13 per cent VAT on spare parts

Himalayan News Service

Kathmandu, June 10

The Ministry of Finance has allowed airline companies to import spare parts at one per cent customs tax like in the previous days. Prior to this, on June 3, the Airlines Operators’ Association of Nepal (AOAN) had issued a press statement stating that air services may be interrupted due to lack of spare parts as the customs office refused to release the spare parts at one per cent customs tax.

As per the new Finance Act, one per cent customs tax will be levied on propellers, rotor blades, wheel brakes, steering, landing gears, window-sills and engines. All the other spare parts will invite 30 per cent customs tax, as per the act. Previously, all spare parts were allowed to be imported at one per cent tax.

Following the new act, the customs office had not released those spare parts for which 30 per cent tax was to be levied. However, the Finance Ministry has stated that all spare parts can be imported at one per cent customs tax.

Meanwhile, the confusion regarding the customs tax was created due to the 55th annual report of the Office of the Auditor General (OAG). The report had mentioned that airline companies were not paying customs tax on spare parts besides the aforementioned ones. The ones not mentioned in the list are referred to as ‘other spare parts’. After the OAG report was made public, the customs office had halted the release of ‘other spare parts’.

“The confusion over customs tax on ‘other spare parts’ has now been cleared by the Finance Ministry. With this, the airline operators can now import other spare parts also by paying one per cent customs tax same as before,” said Pabitra Karki, president of AOAN.

Earlier, AOAN had sought support from concerned authorities on the issue. After the concerned authorities did not respond to the association’s request, it had published a press statement stating that air services could be interrupted.

“We had requested the Ministry of Culture, Tourism and Civil Aviation, Ministry of Finance, OAG, Department of Customs and Civil Aviation Authority of Nepal to resolve the issue but they only assured us verbally of doing the needful,” he said, adding, “That is why we issued a press statement informing them that air services could be interrupted.”

Moreover, the new Financial Act has also waived 13 per cent value added tax (VAT) on import of spare parts. Prior to this, the airline companies had been paying one per cent customs tax along with 13 per cent VAT on import of spare parts.

Airline operators had been seeking VAT waiver on import of spare parts for a long time citing that it was necessary to make the domestic airline sector stronger and competitive.

As per the act, VAT on spare parts of helicopters weighing between 2,000 kg to 15,000 kg has been removed. Similarly, VAT has been removed for spare parts of aircraft weighing more than 15,000 kg.

A version of this article appears in print on June 11, 2019 of The Himalayan Times.

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