British Airways, Lufthansa, different overseas airways face Rs 10,000 cr GST demand from DGGI

The Directorate General of Goods and Services Tax Intelligence (DGGI) has issued show-cause notices to 10 overseas airways working in India. The airways embrace British Airways, Lufthansa, Oman Air, Emirates, and Singapore Airlines.

DGGI has alleged unpaid taxes amounting to Rs 10,000 crore, in line with officers quoted by Economic Times. These notices, dispatched over the previous three days, deal with tax dues on the import of providers by the Indian branches from their respective head places of work.

The June 26 round

Officials acknowledged that airways are usually not coated by the June 26 round on the valuation of the availability of import of providers by a associated particular person, the place the recipient is eligible for full enter tax credit score. This round was referenced by Infosys in a latest built-in GST demand of Rs 32,000 crore.

The interval coated by the notices spans from July 2017, when GST was launched, to March 2024. The airways’ headquarters overseas are mentioned to have been offering providers equivalent to plane upkeep, crew funds, and leases, which the DGGI claims are responsible for GST as they’re providers provided from one authorized entity to a different, Economic Times reported.

Airlines deal in each exempt and non-exempt providers, making them ineligible below the mentioned round. The DGGI had beforehand requested a segregated listing of exempt and non-exempt providers from the airways, however solely 4 of the ten supplied the required info.

The query of location of service

Foreign airways have argued that GST ought to solely be paid on providers taxable in India, given the place of service was each head workplace and department workplace. They additionally raised their issues via their respective embassies to the finance ministry.

The problem was subsequently referred to the fitment committee below the GST Council, which authorized the June 26 round clarifying the valuation of the “supply of import of services” by a associated particular person. However, tax specialists have famous that this round doesn’t adequately deal with the issues of overseas transport strains and airways on account of their distinctive enterprise fashions involving a mixture of taxable and exempt provides.