Council exempts GST on imported services in relief for foreign airlines

In a big relief for foreign airlines with branch offices in India, the Goods and Services Tax (GST) Council has announced an exemption on importing services from related parties abroad.

The GST Council has also suggested regularizing past transactions, meaning that for previous periods, the exemption will be applied retroactively without requiring any changes or penalties for those transactions.

Last month, the International Air Transport Association (Iata), a lobby for global airlines, raised concerns over the levy of GST on branch offices of foreign airlines in India.

Multiple international airlines, including Emirates, British Airways and Lufthansa, were served notices over import of services by their Indian branch offices. The notices were for the period when GST was rolled out in July 2017 till March 2024.

The Directorate General of Goods and Services Tax Intelligence (DGGI) had issued show cause notices for alleged non-payment of GST to the tune of more than ₹10,500 crore ($1.2 billion) to the airlines that also included Oman Air, Singapore Airlines, Etihad Airways, Saudia, Air Arabia, Thai Airways, and Qatar Airways.

Meanwhile, the GST Council has slashed GST on certain cancer drugs and helicopter rides, excluding charter flights, as well as on savory snacks.

The series of decisions were announced after the 54th GST Council meeting, led by finance minister Nirmala Sitharaman, in New Delhi on Monday.

The GST Council recommended the formation of a group of ministers (GoM) to review GST issues related to life and health insurance. The GoM will submit a report by the end of October.

The other key decisions the GST Council took:

• The GST rate on cancer drugs, including Trastuzumab Deruxtecan, Osimertinib, and Durvalumab, was reduced from 12% to 5%.
• The Council reduced the GST on passenger transport by helicopters on a seat-share basis to 5%, while charter flights will still attract 18% GST.
• Flying training courses conducted by DGCA-approved flying training organizations  were exempted from GST.
• The GST rate on extruded/expanded savory snacks was reduced from 18% to 12%, aligning with the rates for namkeens and similar edible products