How GIFT City is Giving a Boost to Aircraft Leasing Business in India

Aircraft leasing is a lucrative and growing business globally, with an estimated market size of $300 billion. India, being one of the fastest-growing aviation markets in the world, has a huge demand for aircraft leasing services. However, until recently, most of the aircrafts used by Indian airlines were leased from foreign lessors, mainly based in Ireland, Singapore and China. This resulted in high costs, foreign exchange outflows and regulatory hurdles for the domestic carriers.

But things are changing now, thanks to the government’s initiatives to promote aircraft leasing business in the International Financial Services Centre (IFSC) at Gujarat International Finance Tec-City (GIFT City). GIFT City is India’s first and only IFSC, which offers a range of financial services and products to domestic and foreign entities in a tax-friendly and regulatory-compliant environment.

The government has introduced several incentives and exemptions for aircraft leasing units operating from GIFT City, such as:

• Tax holiday for 10 years
• Exemption of interest on loan payable by IFSC unit to a non-resident
• Exemption of dividend income earned by an IFSC unit engaged in aircraft leasing from another IFSC unit engaged in the same business
• Exemption of tax deducted at source (TDS) on dividend paid by an IFSC unit engaged in aircraft leasing to another IFSC unit engaged in the same business
• Exemption of TDS on lease rentals paid by an Indian airline to an IFSC unit engaged in aircraft leasing
• Exemption of GST on lease rentals paid by an Indian airline to an IFSC unit engaged in aircraft leasing
• Exemption of customs duty on import of aircraft by an IFSC unit engaged in aircraft leasing

These measures have made GIFT City an attractive destination for global and domestic players to set up their aircraft leasing units. The International Financial Services Centres Authority (IFSCA), the regulator of GIFT City, has already granted licences to three lessors - Vman Aviation, JetSetGo and Acumen Aviation - and more are expected to join soon. Vman Aviation has ordered its first helicopter and JetSetGo has procured its first fixed-wing aircraft from GIFT City.

The benefits of having an aircraft leasing hub in India are manifold. It will:

• Reduce the dependency on foreign lessors and save foreign exchange
• Lower the cost of leasing for Indian airlines and make air travel more affordable
• Create employment opportunities and skill development in the aviation sector
• Boost the domestic manufacturing of aircraft components and ancillary services
• Enhance the competitiveness and innovation of the Indian aviation industry
• Contribute to the growth of GIFT City as a global financial centre

Experts believe that aircraft leasing at GIFT City can change the way India travels and transform the civil aviation sector. With the Covid-19 pandemic being a temporary setback, the fundamentals of the Indian aviation market remain intact and there is still a huge potential for growth in passenger as well as cargo traffic. By leveraging the opportunities offered by GIFT City, India can become a major player in the global aircraft leasing business and achieve its vision of becoming a leading aviation hub.