Will your foreign trips become cheaper? Big GST decision on airlines likely today

Planning an international trip soon? Your ticket to a foreign land might get cheaper after Saturday’s GST Council meeting.

Several reports suggest that the Goods and Sevices Tax Council is likely to give tax relief to foreign airlines in terms of certain services provided by them.

Over the past few months, foreign airlines with set-ups in India have been sent GST notices over the non-payment of tax on import services by Indian entities.

What all will be exempted from taxation?

As per a report by Business Standard, the GST Council is likely to take a call on exempting tax on services like aircraft lease rentals, maintenance, and crew salaries.

More from Business

Hyundai India’s Rs 27,870 crore IPO oversubscribed by 2.28X, largely driven by institutional investors How Indian fintech startups are driving Malaysia’s UPI-like digital payments revolution

Notably, Maintainance, Repair and Operations (MRO) services are provided by the head offices of foreign airlines to their Indian operations.

Tax authorities say that since these services were rendered by the headquarters to the local entities in India and from one legal entity to the other, they are liable to tax.

A government official told Moneycontrol, “When airlines import MRO services from their parent company outside India, under GST, the related party transaction is taxable at 18 percent and its compliance is very stringent for foreign companies. For ease of doing business, the fitment committee has suggested giving tax relief, which will be discussed by the GST Council in the June 22 meeting.”

Foreign Airlines Association knocks on Fin Min doors

After receiving GST notices, the International Air Transport Association took up the issue with the finance ministry and their respective embassies, warning them that operations in India might get hampered if the issue is not resolved.

Impact Shorts

More Shorts

Chennai Ranks #1 in Challan Checks: ACKO Insights for Smarter Car and Two Wheeler Insurance Decisions

Tata Harrier EV vs Mahindra XEV 9e: Design and road presence compared

They argued that since the place of service is based in both the head office and branch office, airlines should be liable to pay only what is taxable in India.

“It is (whether the service is taxable) required to be determined on the basis of each transaction, which can be a complicated process, especially for these two sectors,” an official told ET.

Meanwhile, the fitment committee that includes revenue officials from the central government as well as from state governments is believed to have taken the issue into consideration. The recommendations of the committee will be made during the GST Council meeting on July 22.

What else is on table?

The GST Council is likely to deliberate on issues including taxation on online gaming and the Parliamentary standing committee’s recommendation for lowering tax on fertiliser.

The 53rd meeting of the GST Council, chaired by Union Finance Minister Nirmala Sitharaman and comprising her state counterparts, is also likely to discuss the progress of the Group of Ministers (GoM) on finalising the report on Goods and Service Tax (GST) rate rationalisation and amendments to GST laws based on previous decisions of the council.

The council may also discuss the recommendations made by the Standing Committee on Chemicals and Fertilisers in February to reduce GST on nutrients and raw materials in the interest of fertiliser manufacturing companies and farmers.

Currently, GST at a 5 per cent rate is charged on fertilisers, while raw materials like Sulphuric Acid and Ammonia face a higher GST at 18 per cent.

The issue of further reducing tax on fertilisers was placed before the GST council in its 45th and 47th meetings held in September 2021 and June 2022, though the council did not recommend any change in rates.

Saturday’s Council meeting will be held after a gap of eight months. The 52nd GST Council meeting took place on October 7, 2023.

With inputs from agencies