India Considers Foreign Airlines Get GST Reprieve

Between the head offices and local entities of foreign airline operators from GST, India can waive the supply of services.

GST notices have been received from foreign airlines with offices in India over the past few months for not filing the tax on the import of services via Indian entities from their head offices.

Under the GST Council, the problem has been directed to the fitment committee and the whole opinion is to waive the tax and provide relief for the airlines. After the investigation of the situation by the fitment committee a final call for clarification shall be carried out. On the services from head office to branch office, there is a grey area which is new for both the airline industry and for the shipping industry since it is not easy to find the place of service if there is a question of maintenance and rental from one office to other, an official stated on anonymity.

In the previous year, the Directorate General of GST Intelligence (DGGI) issued notices to 12 foreign airlines for the imposition of the GST on the import of services via Indian branch offices.

Head offices of airlines or shipping firms furnish maintenance, payments to the crew, and rental costs, among others. Tax authorities assert these were services generated through the headquarters to the local entity, one legal entity to another, and are accountable for tax in India.

Along with the finance ministry, on the issue, foreign airlines have represented to the government, quoting that the place of service was both the head office and branch office and airlines are liable to pay only what is needed to get taxed in India. For example, Indian staff outside of India use payment for hotel accommodation. Identical notices are indeed received before some shipping companies.

By the embassies of these countries, the case was carried out after DGGI summoned the airline management. The DGGI has sought its officials to not take any coercive action.

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Before that, the official said there was a requirement for clarity on the problem. It is (whether the service is taxable) needs to be specified based on each transaction, which can be a complex process, particularly for these two sectors.