Revamped GST structure provides major relief to aviation sector

After repeated complaints from industry that high taxation may result in a loss of Rs 6,000 cr

Friday’s changes in the goods and services tax (GST) structure included measures for the aviation sector, on its repeated complaints.

Among primary changes, inter-state movement of goods such as rigs, tools, spares and goods on wheel-like cranes have been defined as not constituting supply. This is a big relief, as such inter-state movement is frequent.

Airlines had said another concern was GST on transfer of aircraft spares, kept in central stores, between states on a daily basis. No input tax credit was available and “we demanded GST exemption on stock transfer for captive consumption” said a sector executive, which was met.

The high rate of Integrated GST (IGST) on import of aircraft parts was another issue flagged by the airlines. It has been decided that IGST on import of spare engines under a lease agreement will not be charged. Multiple airlines had their aircraft grounded because the Customs and excise department had sought five per cent levy on the total cost of the aircraft and another five per cent GST on lease rentals. The airlines see this as unfair. The government has since clarified that aircraft, aircraft engines and parts procured on lease would not face double taxation in the new regime.

“GST paid on repairs carried out in India is (GST) creditable but not if it takes place abroad.

With no engine repair shop in India, it is imperative to send the spares abroad. This will cost Rs 2,000 crore per annum to the industry,” the Federation of Indian Airlines (FIA) had written to the finance ministry.

FIA, representing IndiGo, SpiceJet, Jet Airways and GoAir, made a presentation before top ministry officials on September 27, on behalf of the entire airline industry. It contended that the guideline principles of revenue neutrality and equity had been violated, with the adverse impact being Rs 5,700 crore annually. “This will give huge benefit to competing airlines, especially from the Gulf,” argued FIA.

“Given the status of aviation as an economic multiplier, every percentage point of reduction in GST is welcome. This will help to keep airfares down, when airlines already face a triple challenge of rising crude oil prices, rupee depreciation and constrained airport capacity,” said Amber Dubey, partner at consultancy firm KPMG.