The Ministry of Civil Aviation has asked the Ministry of Finance to postpone the rollout of the Goods and Services Tax (GST) from July 1 to September 1 as some domestic airlines, including national carrier Air India, have expressed their inability to switch to a new tax regime soon.
“We have asked the Finance Ministry to give further time for implementation of GST, expressing the airlines’ view that effecting a change in the global ticketing system would require time,” said a senior Aviation Ministry official, on condition of anonymity.
GDS software
The Aviation Ministry told the Finance Ministry that full-service airlines, Jet Airways and Air India, rely on global distribution systems (GDS) software for booking tickets through travel agents and it would require key changes in the system to include GST.
“Although some airlines demanded eight-nine months to switch to the new GST regime, we have asked the Finance Ministry to postpone the rollout till September 1 at least,” the Aviation Ministry official said, adding that the letter was written by the Ministry to Revenue Secretary Hasmukh Adhia on Monday.
The Finance Ministry had on Wednesday scotched all speculation about any shift in the GST implementation date and had asserted that the new indirect tax system would indeed be implemented from July 1.
In its letter to Mr. Adhia, the Aviation Ministry has recommended four changes in the GST regime that impact the industry.
Favours foreign carriers
It has voiced concerns that the new GST framework would benefit foreign carriers more than the domestic ones on two counts — input tax credits and international travel.
“The full input tax credit should be extended to economy class travel also,” according to the Aviation Ministry letter, which was seen by The Hindu.
On economy class travel, input tax credit can only be claimed on input services and not on procurement of goods, import of aircraft and its spares whereas on premium travel, full input tax credits can be reclaimed on both input goods and services, under the present GST regime.
Global airline body International Air Transport Association (IATA) Director General and Chief Executive Officer Alexandre de Juniac said in a letter to Finance Minister Arun Jaitley on June 1, that Indian airlines are concerned that this move “may favour foreign carriers over domestic carriers as the former tend to sell a larger portion of premium class travel.”
The Aviation Ministry has further demanded that taxation principles similar to the present service tax system on international travel to continue under GST. Under the GST, non-stop flights will become expensive than stopover flights which may attract passengers to book flights with Gulf carriers, the official said. For instance, GST will apply on full ticket from Delhi to New York but in case of a Delhi-Dubai-New York flight, the GST will be charged on Delhi-Dubai sector only.
“GST on international travel should apply on furthest break point from the origin (of the journey),” the a Aviation Ministry said.
The Aviation Ministry has also demanded a GST exemption on inter-state transfer of stocks so that movement of aircraft spares – not meant for resale purposes – from one location to the other can take place without attracting any additional cost. “The Indian Railways got a similar exemption on stock transfers in the recent GST Council meeting. In case an aircraft is grounded, the cost of repairing will go up since movement of aircraft spares from one state to another will attract GST,” the official said.
