Foreign carriers like Lufthansa, British Airways, Oman Air, Emirates, Singapore Airlines among ten others have come under fire for not paying taxes amounting to approximate Rs 10,000 crore.
As a result, the Directorate General of Goods and Services Tax Intelligence (DGGI) has sent show cause notices to the above airlines over the last three days, sources said.
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The notice pertains to unpaid taxes on services imported by Indian branches from their respective head offices.
IATA fumes over show-cause notice
Reacting strongly to this notice, the International Air Transport Association (IATA) has raised concern and warned that 'these taxes can dampen and risk the country's strong aviation potential'.
The IATA has further expressed disappointment on the issue and urged the Indian government to resolve the matter quickly. The IATA further states that Indian airlines operating outside India do not face such tax inclusions and that India is alone in this approach towards taxes.
Dr Xie Xingquan, IATA's Regional Vice President for North Asia and Asia Pacific (ad interim), further said, "This is not found anywhere else around the world."
Calling this assertion as flawed, the IATA had previous warned that international carriers might halt their India operations if the issue is not resolved.
Who Has Been Sent Notices?
According to sources, the tax authority has sent tax avation notices to:
* Emirates: Rs 7,550 crore
* Etihad Airways: Rs 1,660 crore
* Saudi Arabia Airlines: Rs 612 crore
* Air Arabia: Rs 455 crore
* Oman Airlines: Rs 71 crore
* Thai Airways: Rs 60 crore
* Qatar Airways: Rs 53 crore
* Singapore Airlines: Rs 40 crore
* British Airways: Rs 33 crore
* Lufthansa Air Cargo: Rs 10 crore
What is the issue all about?
The airline headquarters (HQs) located oversees have been handling services like aircraft maintenance, crew payments, and rentals.
DGGI states that as the services are provided from one legal entity to another, they come under GST gambit. The ‘ten’ airlines have not remitted the amount so far.
The entire process began in August 2023 when DGGI initiated the investigation. Going a step further DGGI called airline executives from their India offices in December 2023 and January 2024 asking them for explanations regarding unpaid taxes and giving a list of tax-exempt services.
To this, the foreign airlines responded by saying that GST should be applicable to taxable services within India in cases where both HQ and branch is located in India.
This led to the intervention of finance ministry and the matter was referred to GST Council's fitment committee. The council issued a circular on June 26, 2024 clarifying the valuation of ‘supply of import of services’ by a related person.
As per media sources, an official was found quoting that airlines are exempted from the June 26 circular regarding the valuation of supply of imported services by a related party when the recipient is entitled to a full input tax credit.
The official further went on to explain that the airlines provide both exempt and non-exempt services, which makes them ineligible under the circular.
The DGGI has asked the airlines for a detailed list of exempt and non-exempt services to which only four airlines have responded as per sources.
This circular sent by Infosys in following a recent integrated Goods and Services Tax (GST) demand of Rs 32,000 crore. The notices cover the period from July 2017, when GST was introduced, to March 2024.
Published: 06 Aug 2024, 05:35 pm IST
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