GST relief for aircraft on lease

July 08, 2017 09:41 pm | Updated 09:41 pm IST - NEW DELHI

In a major relief to airlines, the import of aircraft on lease will be exempted from the Goods and Services Tax (GST), the Finance Ministry said in a notification on Saturday.

“We represented the matter to the Revenue Department. The Revenue Department moved expeditiously and clarified the matter immediately,” Civil Aviation Secretary R.N. Choubey told The Hindu .

Airlines will not have to pay taxes on import of aircraft on lease if the GST is already paid on lease rentals, according to the notification by the Finance Ministry.

“The government has finally provided exemption from the levy of GST as part of customs duty on the import of aircraft, engines and parts on lease basis. Thus, GST would only be payable on payment of lease rentals and not at the time of import,” said Abhishek Jain, Tax Partner, Ernst & Young.

“This would bring huge relief to the airline industry by resolving the issue of dual levy of GST, especially for the reason that GST paid at the time of import was not creditable against economy class travel,” Mr. Jain said.

‘Huge burden’

The Finance Ministry had given no relief to airlines for import of aircraft and its spares under the GST. A 5% levy was charged under GST on the import of aircraft.

In the previous tax regime, customs duty was exempt on the import of aircraft and its spares, and service tax was also not applicable on aircraft taken on operating lease. The Federation of Indian Airlines (FIA), which represents major domestic airlines IndiGo, SpiceJet, Jet Airways, GoAir and Air India, had told the government that a dual levy on aircraft leasing — 5% GST at the time of import and 5% tax again when lease rentals are paid — “will result in huge financial burden to the airlines”. “The move comes as a huge relief to the airline industry, which was expecting annual losses worth ₹ 800 crore due to the double taxation on aircraft lease,” said a senior airline executive, requesting anonymity.

0 / 0
Sign in to unlock member-only benefits!
  • Access 10 free stories every month
  • Save stories to read later
  • Access to comment on every story
  • Sign-up/manage your newsletter subscriptions with a single click
  • Get notified by email for early access to discounts & offers on our products
Sign in

Comments

Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.

We have migrated to a new commenting platform. If you are already a registered user of The Hindu and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.