No VAT on aircraft engine parts, propellers
The proposed budget for the 2024-25 fiscal year has suggested VAT exemption on aircraft engines, parts of aircraft engines, and turbo-propellers at the import stage from the existing 15% to 0%, a long-standing demand of Aviation Operators Association of Bangladesh (AOAB).
The 15% VAT exemption will also cover the import of parts of turbo-jets or turbo-propellers.
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"In the current reality, domestic airlines are gradually lagging behind in the competition with the foreign airlines due to various reasons," Finance Minister Abul Hassan Mahmood Ali said in his budget speech today.
He added, "To support the growth of local aviation companies and tap the industry's future potential, I propose to withdraw the VAT on aircraft engines and spare parts of propellers at the import stage."
The new proposal will help local carriers to compete with foreign airlines, which have about 75% share in the aviation market in Bangladesh.
AOAB, a platform of the country's private airlines and helicopter operators, however, said they demanded an exemption of customs duty, which is more urgent for a direct impact on a customer level.
Kamrul Islam, general manager (public relations), of US-Bangla Airlines, said although late, the government has finally met their long-standing demand.
"We welcome the proposal. I think airlines will benefit from this," he also said.
Kamrul said over the past 26-27 years, several private operators, including GMG Airlines, United Airways, and Regent Airways, had to cease operations as they struggled to survive due to high operating costs.
Mofizur Rahman, secretary general of AOAB and managing director of NovoAir, said, "Private airlines will benefit from the move. The VAT exemptions will help those who use small aircraft and helicopters."
He said their demand for exemption in customs duty on aircraft parts and engines is yet to be fulfilled.
"We import maximum of two engines per year, whereas, aircraft parts of minimum Tk3 crore are imported. So, if the NBR [National Board of Revenue] considers the exemption of customs duty, it will make a direct impact on the customer-level and lead to a fall in ticket prices," he said.
"Nevertheless, we welcome the decision of the government," he added.
A total of Tk 5,695 crore has been allocated for civil aviation and tourism ministry in the proposed budget for 2024-25 fiscal year.
The allocation is Tk 655 crore less than the revised budget of FY2023-24, which was Tk 6,350 crore.
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