India Considers GST Relief for Foreign Airlines

India is considering not charging GST on services exchanged between the main offices and local branches of foreign airlines. Recently foreign airlines with offices in India received GST notices for not paying taxes on services provided by their main offices abroad. This issue is being reviewed by the GST Council’s fitment committee, which is leaning towards giving tax relief to these airlines. A final decision will be made after more examination.

A senior official said it’s unclear where services like maintenance and rentals between main and branch offices should be taxed, especially for airlines and shipping companies. Last year, the tax authorities issued notices to 12 foreign airlines for these services. The airlines argue they should only pay taxes for services within India.

Some shipping companies have faced similar issues, and embassies have also stepped in after the authorities summoned airline executives. Currently, tax officials are advised not to take any strict actions until the issue is resolved. The official emphasized the need for clear rules, as determining tax for each transaction is complex for these industries.

After the summoning of airline management by the DGGI, embassies of the respective countries have engaged in discussions on the issue. Reports said the DGGI has instructed its officials to refrain from any coercive actions. The report quoted the senior official as saying, “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.”