DGGI Targets Over Ten Airlines for GST Compliance in India

The Directorate General of GST Intelligence (DGGI) is taking a serious step by checking on ten international airlines working in India because they might not be paying a tax called GST as they should. This shows that the government is really focusing on making sure companies from other countries follow Indian tax rules properly.

Airlines Under Scrutiny

The list of airlines summoned includes well-known names like;

1. British Airways
2. Lufthansa
3. Singapore Airlines
4. Etihad Airways
5. Thai Airways
6. Saudi Arabia Airlines
7. Kuwait Airways
8. Emirates
9. Qatar Airways
10. Oman Airlines, and
11. Air Arabia

Non-Compliance with Reverse Charge Mechanism

In October 2023, the Directorate General of GST Intelligence (DGGI) conducted searches at the Indian offices of airlines such as Etihad, Emirates, and Qatar Airways. This move aimed to investigate potential GST evasion on services sourced from their foreign headquarters, crucial for their operations within India.

The crux of the issue lies in the non-adherence to the reverse charge mechanism, a tax mandate requiring Indian recipients to pay GST on services imported from abroad.

Essentially, when these airlines use services like aircraft maintenance or pay crew salaries through their main offices outside India, their Indian branches are expected to pay GST on these services, ensuring compliance with local tax laws.

Industry Response and Challenges

The airlines in question have reportedly sought additional time to respond to the DGGI’s summons, indicating the complexity of the issue. Legal experts emphasize that not all transactions between the Indian branches and their foreign head offices are automatically taxable.

The taxability of such transactions hinges on the nature of the service and where it is provided. For instance, crew salaries and hotel accommodations for staff working outside India may not fall under the GST ambit due to the geographical specifics of service provision.

Expert Insights

Legal professionals and tax experts have voiced their opinions on the matter, highlighting the detailed nature of international service transactions.

They argue that determining the taxability of such transactions requires a thorough understanding of the services’ nature and the contractual agreements governing them. The challenge lies in allocating costs across jurisdictions and accurately valuing the imported services.

What This Means for Airlines?

The DGGI is paying more attention to industries where tax evasion might be happening. This could worry the aviation industry about being watched more closely, but it shows the government’s effort to make tax rules fair for everyone. This is important for protecting the country’s finances.

As things develop, the aviation industry and tax officials will have deep discussions on following tax rules, how taxes apply, and the details of doing business internationally. This highlights the need for strong tax rules and clear guidelines for international companies in India.