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Global airlines body International Air Transport Association (IATA) today sought clarifications on the tax treatment of air travels under Goods and Services Tax (GST) and claimed that there were “information gaps” regarding the implementation of the new tax regime.
The aviation ministry, too, had earlier sought postponement of the GST implementation by two months on the ground that airlines needed more time to revamp their systems to comply with the new tax regime.
In a u-turn, the ministry later said it was prepared for the GST roll out from the stipulated date — July 1. “There are still information gaps. We look forward to receiving the guidance notes to be provided by the GST Council,” said Country Director-India of the IATA Amitabh Khosla in a press statement.
The body has sought clarification on “taxation treatment of continuous journeys” as the new taxation system is likely to make non-stop flights more expensive than stop-over flights. It has also expressed concerns about levying of the GST on air cargo. “We believe that the levying of GST on cargo export services by air contradicts standard GST principles as well as the treatment of such services under the service tax regime. Clarification would help align this with international standards and principles,” the statement added.
Carriers, including Air India, have expressed concern over certain aspects of GST. Airline officials said making changes in the global ticket distribution system to ensure compliance with GST would take time. Airlines are also in a fix over the possibility of movement of stocks or equipment or aircraft parts being taxed under GST.
Another sticking point is that input tax credit is only available for business class travel and not for economy class travel — a segment where there are more number of passengers.This would result in spike in operational costs for airlines.
Input tax credit 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 tax credit provides a leeway for the entities concerned.
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