GST Notices to Foreign Airlines Regularised: CBIC Department

The Central Board of Indirect Taxes and Customs (CBIC), citing the GST council’s recommendations, has regularised previous show-cause notices for tax demands made to foreign airlines. It issued a circular regarding the GST applicability of Preferential Location Charges (PLC) for residential or commercial properties.

The board on the notions of ‘as is’ and ‘as is where is’ has issued a full clarification. Based on the GST council’s recommendations, it will be used to regularise the tax demand for short or no tax payments.

“On suggestions of the 54th GST Council, the payment of GST on import of services by a branch of a foreign airlines company from a related person or any of its establishments outside India, when made without consideration, is hereby regularised for the period from July 1, 2017, to October 9, 2024, on ‘as is where is’ basis,” a circular released by the CBIC stated.

The issue became contentious this year when the DGGI (Director General of GST Investigation) issued show-cause notices to 10 major foreign airlines, demanding Rs.10,000 crore. It even said before that certain services will not be taxed beginning October 10.

The same circular, based on council suggestions, provided relief to homebuyers who wanted to obtain properties in desirable positions such as facing a swimming pool or being cornered.

‘Preferential Location Charges’ shall not be considered as part of the construction services. It directed that there be no separate GST rate, which is 18% for these. It is probable that the GST for the entire service, including PLC, will be 1% (affordable housing), 5% (non-affordable), or 12% (commercial building).

It should be noted that land accounts for one-third of an immovable property’s transaction value and is not included in the GST computation.

The GST council‘s suggestion complies with this circular, which is clubbed location costs or PLC with the consideration for construction services, also known as composite supply.

A composite supply refers to two or more goods or services that are offered as a whole and cannot be sold separately. This supply contains the principal supply, which is the primary good or service that the buyer has requested.

The rate applicable to the major supply will be applied before the total supply. In the same example, the main supply is construction services, and the PLC is intimately linked to them. As a result, the PLC will have the same tax treatment as the main supply, which is the construction service.