Import services by foreign airlines get GST exemption

Giving a major relief to foreign airlines, the Goods and Services Tax (GST) Council has decided to exempt import of services by an establishment of a foreign airlines. The relief was given citing the Indian carriers get similar tax benefits in abroad.

The matters assume significance as the Directorate General of Goods and Services Tax Intelligence (DGGI) recently issued show cause notices to ten foreign airlines operating in India for allegedly evading taxes amounting to Rs 10,000 crore.

Earlier, the International Air Transport Association (IATA), the global trade body for airlines also criticised the show-cause notices and said it could act as stumbling block to the country’s strong aviation potential.

According to them, India is alone in its approach, nowhere else around the world is this practiced.

The headquarters of these airlines which is ideally overseas have been handling services like aircraft maintenance, crew payments, and rentals. These services are provided by foreign airlines to their Indian operations.

The DGGI were of the view that since these services are provided from one legal entity to another, they are subject to GST, which the airlines have not remitted. Foreign airlines cited that the GST should only be applied to taxable services within India, given that the place of service included both the head office and branch office. As a result, the matter was referred to the GST Council’s fitment committee.

“We have decided to give branch exemption to foreign airlines as Indian carriers gets similar exemption abroad,” said FM Nirmala Sitharaman.