A panel of officials has recommended that the GST Council grant tax exemptions to foreign airlines on specific services imported from their overseas Indian branches or related entities, where no monetary transaction is involved.

This proposal follows extensive deliberations by the fitment committee and could offer substantial relief to foreign airlines currently facing tax demands from the Directorate General of GST Intelligence (DGGI).

Initially, the belief was that foreign airlines' Indian branches were required to pay an 18% tax on these imported services under the reverse charge mechanism, as per Section 15 of the CGST Act, 2017. This interpretation treated any service imported by an airline’s Indian branch from its head office or related entities abroad, even without payment, as a taxable supply.

However, after airlines clarified that their head offices bear all costs related to aircraft leases, fuel, maintenance, and other operational expenses for international flights, the committee recommended exempting these airlines from additional taxes.

The Ministry of Civil Aviation was also consulted, leading to a decision that this exemption would apply to services imported by a foreign airline’s Indian establishment from related entities abroad, provided the airline has already paid GST on the transportation of goods and passengers within India.

Notable foreign airlines, including Finnair, KLM Royal Dutch Airlines, Qatar Airways, Virgin Atlantic, Etihad, and Emirates, as well as shipping lines like Saudi Airlines and Air Arabia, have received GST notices related to these imported services.

Source from: https://www.indiatoday.in/business/story/gst-panel-recommends-tax-relief-for-foreign-airlines-2592674-2024-09-03