Foreign airlines likely to get tax relief on import of services in upcoming GST Council meeting: Official

The Goods and Services Tax (GST) Council in its meeting on June 22 is likely to give tax relief on the import of maintenance, repair and operations (MRO) services for foreign airlines in India from the current 18 percent, a government official said.

“When airlines import MRO services from their parent company outside India, under GST, the related party transaction is taxable at 18 percent and its compliance is very stringent for foreign companies. For ease of doing business, the fitment committee has suggested giving tax relief, which will be discussed by the GST Council in the June 22 meeting,” the official told Moneycontrol.

The issue has been examined in detail by the GST’s fitment committee.

As per GST laws, related party transaction refers to the transfer of goods or services between entities under common ownership or management.

The Council is likely to relax the payment rule of GST for the import of MRO services. Instead of making the payment at the time of import of services, the subsidiary companies will be allowed to make the payment at the time of discharge of services.

Currently, if a subsidiary Indian company is importing services from the parent company and does not pay GST on it, the tax authorities detect it and send a demand notice. The deemed supply is taxable at 18 percent, for which input tax credit may be received later at the time of further supplies by the company. The Council is likely to discuss that if the Indian company is not paying GST on the import of services, and is paying the entire tax later at the time of supply of services, the tax department should not bother.

The GST authorities had sent several notices to all airlines that have parent companies outside India for non-payment of GST on import of services. All foreign airlines including Finnair, KLM Royal Dutch Airlines, Qatar Airways, Virgin Atlantic, Etihad, Emirates, Saudi Airlines, Air Arabia, Oman Air, Kuwait Airways and British Airways and shipping lines have received GST notices in this regard.

Source: moneycontrol