The Central Board of Indirect Taxes and Customs (CBIC) has notified that foreign airline companies in India would be exempt from paying GST on services imported from their offshore branches. The circular follows a recommendation made by GST Council on September 9.
Experts say this would grant relief to the foreign airline industry for future transactions, but whether or not this notification is applicable for the past period is unclear at the moment. The Council, however, in its September meeting had recommended to regularise taxation of past transactions on ‘as is where is’ basis.
“Concerns have emerged regarding the applicability of the exemption, as the language of the notification suggests that the relief may only apply to future transactions, which is not supporting the earlier statements about retrospective application,” said Sanjay Chhabria, Indirect tax-lead at Nexdigm. As per industry sources, foreign airline companies are facing a tax liability to the tune of Rs 40,000 crores, which are likely to be annulled.
Further, the exemption comes with certain conditions. For instance, the foreign airline must secure certification from the Ministry of Civil Aviation (MoCA), declaring the airline as a designated carrier under existing bilateral agreements. Additionally, Indian carriers must receive similar tax benefits in the airline’s home country. Currently, the process for obtaining MoCA certification is not clearly defined, leaving airlines in limbo while they wait for further announcements, say experts.
In a separate notification, the CBIC allowed for rectification of past orders related to the wrongful availment of input tax credit (ITC) under GST. Taxpayers can now correct past errors pertaining to compliance issues, for the period up to FY21, and then rightfully claim the ITC.
As per the notification, taxpayers must submit an electronic application on the GST portal within six months from the date of this notification. Along with the application, they must upload relevant information pertaining to their previous transactions.
Sandeep Sehgal, Partner-Tax, AKM Global, said that This move is expected to ease the financial burden on industries that faced tax demands due to this issue. “The six-month window for rectification provides a lifeline for businesses to align their tax claims and will help in reducing disputes with tax authorities,” he said.
Please click here to view the full story on Financial Express.