You are here: Home » Economy & Policy » News » GST
Business Standard

With GST, airlines might face taxation air pockets

Airlines are in a fix over the possibility of movement of aircraft parts being taxed under the GST

Press Trust of India  |  Mumbai 

GST, tax
GST rates have been fixed at 5 and 12 per cent for domestic and international tickets, respectively

seem to be preparing for turbulence with the implementation of the regime as certain segments of aviation business, including movement of spare parts, might attract more taxes.

While the Goods and Services (GST) is set to be in place from July 1, lack of clarity in certain areas pertaining to business has raised concerns of higher operational costs, according to industry executives.

Operating in a highly competitive market where the margins are wafer thin, are in a fix over the possibility of movement of "stocks (equipment or aircraft parts)" being taxed under the In addition, the has not given any relief with regard to the import of aircraft and its spare parts.

Besides, the executives feel that input credit should be extended for and not just for

On the basis of framework announced, airline industry executives said there is no clarification or exemption to the carriers with respect to "movement of stocks from one state to another when it is not for resale but for captive use".

"If I have to shift a tyre or an engine, then I have to pay GST before moving it... This means that movement of stock (equipment or spare part) even for captive purpose will attract tax. Such a practice is not there anywhere else," a senior executive at a leading airline said.

Such a system, if implemented, would mean that airlines would be forced to either pay for every "stock movement" or having an inventory at places of operations and the latter would result in higher expenses, the executive noted.

Another sticking point is that input is only available for and not for travel -- a segment where there are more number of passengers.

Input allows an entity to deduct the levies paid for the inputs while paying the taxes on the final output. Since GST is applicable for goods as well as services, input provides a leeway for the entities concerned.

"As input tax credit on inputs is not available for (under the GST), it would result in costs to the airlines," the executive said.

According to executives, GST payments on procurement of goods, import of aircraft, aircraft spares are not available for economy class travel.

With the country's domestic aviation market growing at double digits for more than two years, domestic carriers are looking to attract more passengers and the resultant competitive fares along with rise fuel costs have impacted their overall profitability.

Against this backdrop, executives feel that higher taxes on different fronts could further put pressure on the airline business.

The GST rates have been fixed at 5 and 12 per cent for domestic and international tickets, respectively.

First Published: Sun, June 11 2017. 14:36 IST