CBIC Grants GST Exemption to Foreign Airlines on Imported Services

New Delhi, Oct 10 (KNN) The Central Board of Indirect Taxes and Customs (CBIC) has announced that foreign airline companies operating in India will be exempt from paying Goods and Services Tax (GST) on services imported from their offshore branches.

This exemption follows a recommendation made by the GST Council during its meeting on September 9.

While the move provides relief to foreign airlines for future transactions, experts caution that the applicability of this exemption to past transactions remains unclear.

"Concerns have emerged regarding the applicability of the exemption, as the language of the notification suggests that the relief may only apply to future transactions, which is not supporting the earlier statements about retrospective application,” said Sanjay Chhabria, Indirect Tax Lead at Nexdigm.

In its September meeting, the GST Council had recommended regularising the taxation of past transactions on an "as is where is" basis, but this aspect has not been definitively addressed in the CBIC’s circular.

Industry sources indicate that foreign airlines in India face tax liabilities amounting to an estimated Rs 40,000 crore, which may potentially be annulled under this new regime.

The exemption, however, is conditional. Foreign airlines must secure certification from the Ministry of Civil Aviation (MoCA), confirming them as designated carriers under existing bilateral agreements.

Additionally, Indian carriers must receive similar tax benefits in the airline’s home country. At present, the certification process for MoCA approval remains undefined, creating uncertainty for airlines that are waiting for clarity.

In a separate development, the CBIC has allowed rectification of past orders related to the wrongful availment of input tax credit (ITC) under GST.

Taxpayers now have a six-month window to correct past compliance errors for the period up to FY21, after which they can claim the ITC they are entitled to. This move is expected to alleviate financial strain on industries that have faced tax demands due to past errors.

“The six-month window for rectification provides a lifeline for businesses to align their tax claims and will help in reducing disputes with tax authorities,” said Sandeep Sehgal, Partner-Tax at AKM Global.

Taxpayers must submit electronic applications via the GST portal, along with relevant transactional information, to rectify the errors.

(KNN Bureau)