GST Council's Tax Exemption for Foreign Airlines Welcomed by IATA

The recent decision to exempt the import of services by foreign airline establishments in India from tax has been welcomed by the International Air Transport Association (IATA). Willie Walsh, IATA's chief, described it as a positive development. This move comes after IATA raised concerns about GST demands on foreign carriers.

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Earlier this month, the GST Council decided to exempt these services and regularise past periods on an as-is-where-is basis. This decision addresses the issue that had been causing significant concern among foreign airlines operating in India. Walsh noted that this resolution is a step in the right direction.

GST Demands on Foreign Airlines

On August 6, sources revealed that show cause notices for GST demands worth over Rs 10,000 crore were issued to ten foreign carriers operating in India. These demands were related to expenses incurred by the headquarters of foreign airlines with branch offices in India. The Directorate General of GST Intelligence (DGGI) had proceeded with these notices despite industry representations.

Xie Xingquan, IATA's Regional Vice President for North Asia and Asia Pacific ad interim, criticised DGGI's stance. He stated, "DGGI’s assertion that GST should apply to expenses incurred by the headquarters of foreign airlines with a branch office in India in the course of providing air transport services is flawed. It does not take into consideration the nature and conventions involved in the provision of international air transport."

IATA's Concerns and Reactions

Last month, IATA expressed disappointment over the GST demands and warned that such actions could dampen India's strong aviation potential. The association highlighted that these tax demands could pose risks to the country's aviation sector. Despite multiple representations made by the industry, DGGI continued with its approach.

Xie Xingquan also pointed out that India's approach is unique and not practised anywhere else globally. He emphasised that this stance does not align with international norms and conventions in air transport services.

Speaking at a conference in the national capital, Walsh reiterated that resolving this tax issue was crucial. He mentioned that it had become a significant concern for foreign airlines operating in India. The recent decision by the GST Council has now alleviated these concerns.

The exemption decision is expected to provide relief to foreign carriers and support India's aviation sector's growth. By addressing these tax issues, India can maintain its position as a strong player in global aviation.