IndiGo, Vistara and AirAsia India fail to use imported aircraft as confusion lingers on GST lease rules

NEW DELHI: IndiGo, Vistara and AirAsia India are unable to deploy aircraft they imported in the first week of this month because of confusion over levying tax under the new goods and services tax rules, causing revenue loss for the airlines.

The customs and excise department has sought a 5% levy on the total cost of the aircraft and another 5% GST on lease rentals. The airlines see this as unfair. The government, too, has since clarified that aircraft, aircraft engines and parts procured on lease would not face double taxation in the new regime. However, these planes, one each by the three carriers, were imported before the government issued the clarification on July 8.

GST, which came into effect on July 1, in its original form had allowed for taxation at both points. The July 8 circular didn't say whether it is with retroactive effect or not. The problem arose because of this, said a senior executive at one of the airlines, adding: "We would not have faced this problem if the government's order was effective from the day GST kicked in."

A senior tax official dealing with GST, however, said such a circular generally comes with retrospective effect. "In other words, in my personal opinion, it cannot be said that circulars are only prospective, when it clarifies on a law or legal provision, which is barely seven days old," he told ET.

 

  

ET couldn't get an official comment from the tax authorities on Friday. Messages sent to top executives at IndiGo, AirAsia India and Vistara did not elicit any response. But executives who spoke on the condition of anonymity said they were yet to hear from the authorities on Friday.

"Our aircraft was imported before July 8, 2017, and the customs department is of the view that the aircraft would be subjected to 5% on import. This, we believe, is not fair," said a senior executive. On Friday, the planes were still parked on the tarmac at the Delhi airport awaiting clearance from the customs and excise department. Inability to deploy the aircraft at a time when demand for air travel is increasing at a quick pace is causing revenue loss for the airlines, even as they also incur cost on rentals. An analyst said instances like this would defeat the benefits that GST would bring.

"Any leased asset like aircraft has a cost irrespective of the fact whether it's being operated or not. Such delays not only impact revenue of airlines, but also defeat the purpose of reforms like GST and the government should resolve the matter soon," said Mark Martin, the chief executive of Martin Consulting, an aviation advisory firm. Airline executives said they had raised the matter with key officials in the aviation ministry. In fact, the industry demand with pressure from the ministry had led the government to issue the clarification on double taxation.

Source::: The Economic Times, dated 15/07/2017