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GST impact: Airlines seek tax exemption on aircraft parts imported after servicing

The Federation of Indian Airlines has written to ministries of finance and civil aviation seeking the exemption

business Updated: Sep 09, 2017 13:40 IST
Suchetana Ray
Suchetana Ray
Hindustan Times, New Delhi
GST,Federation of Indian Airlines,Aviation sector
The burden of increased taxes under the GST on the airlines servicing industry could be as high as Rs 4,750 crore every year. (HT file photo / Representational)

Domestic airlines have sought from the government tax exemption under the GST regime on importing and servicing aircraft parts.

The Federation of Indian Airlines (FIA), an association of private airlines in India, has written to ministries of finance and civil aviation, citing the high tax rate on servicing parts and also on import of these parts has put a huge financial burden on the companies.

Sources in a private Indian carrier said that the burden of increased taxes under the GST could be as high as Rs 4,750 crore every year, on the industry.

Touted by the government as the biggest tax reform since Independence, the Goods and Services Tax kicked in on July 1.

The FIA in its submissions before the government said that till June 30, no taxes were levied on re-import of aircraft parts and engines after servicing them abroad. Further, import of aircraft parts will also be subjected to the GST up to 28%, said the airlines lobby requesting that such imports be exempted from taxes.

“In light of the above difficulties faced, it is humbly prayed that an exemption be granted on the IGST paid on the parts of aircraft imported after repair/servicing,” said the FIA letter.

Sources in private airlines say that a request has been made to the government to release the re-imported repaired engines against bonds by companies.

A source in a private airline said that on an average 250 engines are sent abroad by private carriers for repair and servicing.

“If 18% tax is levied on each engine under the GST, it would be additional burden of thousands of crores for the airline industry. This would wipe out the profitability of the industry,” the airline executive added. He did not wish to be quoted.

This is not the first time that the airline industry has raised concerns about the GST. Concerns were raised about imposition of taxes on aircrafts being imported and then leased, but the government had then suitably resolved the issue.

Following its submissions before the government, the FIA hopes that their concerns will be taken up when the GST Council, the highest decision-making authority in the new tax regime, meets on Saturday.

First Published: Sep 09, 2017 13:30 IST