According to reports, GST Intelligence teams have conducted searches at the offices of foreign carriers in India due to alleged tax evasion related to the import of services from their head offices by their Indian branch offices. The Directorate General of GST Intelligence (DGGI) officials reportedly carried out the search operations at many airline offices including, Etihad, Emirates, Saudi Airlines, Qatar Airways, Air Arabia, Oman Air, and Kuwait Airways.
The DGGI claims that these carriers evaded taxes by importing services from their head offices by their Indian offices.
According to sources, the airlines were including records of expenses like lease rentals, crew charges, fuel charges, and more in their head office accounts without billing these expenses to their Indian offices.
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Transactions between a foreign airline’s head office and its Indian branch office are subject to GST regulations, according to the terms and clauses of the Goods and Services Tax (GST).
Even if there is a supply without consideration between the head office and branch office of a company, it is considered a supply for tax purposes, under Schedule 1 of the Central Goods and Services Tax (CGST) Act.
The import of services is subject to tax under reverse charge when there is an actual receipt of the import service. In many cases, expenses are booked either at the head office or branch office for administrative convenience, although they should be subject to tax under reverse charge, said a tax professional.
There has been detected GST evasion amounting to Rs 57,000 crore from April 2020 to September 2023 by the DGGI, said the Finance Ministry in its statement. The findings led to the discovery of over 6,000 instances of fake input tax credit (ITC) claims, resulting in the arrest of 500 individuals.
The statement further added that in the current financial year (2023-24), 1,040 fake ITC cases involving Rs 14,000 crore have been detected, and 91 fraudsters have been apprehended.
The DGGI has focused on identifying and apprehending the masterminds and disrupting syndicates involved in GST evasion since June 2023, it added.
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The statement further added that the DGGI has initiated a special drive against the practice of claiming fake ITC to prevent revenue leakage. Advanced data analysis tools have been used to find out such cases and nab tax evaders.
The statement from the Finance Ministry also noted that tax syndicates often exploit individuals by luring them with job opportunities, commissions, or bank loans to obtain their KYC documents. These documents are utilized to create fake or shell companies without the individuals’ awareness or consent.
To deal with GST evasion, the DGGI utilizes advanced data analytics tools and its intelligence network across the country to gather information on tax evasion.
In total, Rs. 1.36 lakh crore of overall GST evasion (including fake ITC) has been detected in FY2023-24, and voluntary payments of Rs 14,108 crore have been made for the same.