Foreign airlines to pay GST demands on cross charges
Foreign airlines including British Airways, Etihad, and Emirates have received Goods and Services Tax (GST) demand notices related to cross charges. They are likely to pay the amount without disputing its validity, Moneycontrol has reported. Cross charges involve transactions between separately registered units of a single entity, which are subject to the GST regime in India. Finnair, KLM Royal Dutch Airlines, Qatar Airways, and Virgin Atlantic have also confirmed receiving notices from the Directorate General of GST Intelligence (DGGI).
Airlines plan to claim rebates in home countries
Most foreign airlines that received GST notices plan to claim rebates in their home countries on the additional GST paid. A European carrier official mentioned they are likely to pay the fines, but noted that imposing import tax under GST on airlines is ambiguous under the current framework of Indian taxation. Another official from a foreign carrier said most airlines are likely to claim tax rebates in their own countries on the expenses incurred due to the DGGI's notices.
Taxability and valuation issues
Manish Mishra, a partner at JSA Advocates & Solicitors, explained that airlines need to establish the place of supply concerning the charges in question and determine the applicability of GST on each item separately. He added that for supplies of goods or equipment supplied/leased outside India, it can be argued that they should not be leviable to GST as these supplies have taken place outside India.
DGGI's action within GST framework
Aviation expert Vipul Saxena stated that action by DGGI is well within the framework of GST. It will likely be decriminalized and converted into payment of dues with a nominal penalty. This process would comply with the orders without impacting the relationships between India and the countries to which these airlines belong. While Indian carriers may gain a cost advantage over foreign airlines in India, airline companies with offices in other countries also have similar tax obligations.
