TBM Staff - Mumbai
India is considering exempting services exchanged between the head offices and local branches of foreign airline operators from the goods and services tax (GST). According to a report in the Economic Times, foreign airlines with offices in India have recently received GST notifications for not paying taxes on services imported from their headquarters by Indian entities.
The issue has been presented to the GST Council’s fitment committee, which is leaning towards granting tax exemptions and providing relief to airlines. A final decision will be made after the committee thoroughly examines the matter, the report stated.
A senior official mentioned, “There is a grey area on the services from head office to branch office, which is unique to both the airline and shipping industries as it is difficult to determine the place of service in cases of maintenance and rental from one office to another.”
Last year, the Directorate General of GST Intelligence (DGGI) issued notices to 12 foreign airlines concerning the imposition of GST on services imported by Indian branch offices. Airline headquarters cover expenses such as maintenance, crew payments, and rental costs, which tax authorities argue constitute transactions between legal entities and should be taxed in India.
Foreign airlines have communicated this issue to the government, including the Ministry of Finance, arguing that the service location includes both the head office and branch office. They believe airlines should only be responsible for taxes applicable within India, citing examples like hotel accommodation payments for Indian staff outside the country. Similar notices have been issued to some shipping companies, the report noted.
Following the DGGI’s summoning of airline management, embassies of the respective countries have engaged in discussions on the issue. Reports indicate that the DGGI has instructed its officials to avoid any coercive actions in this matter.
