Iata flags concerns over $1.2 bn GST notices to foreign airlines

The International Air Transport Association (Iata), an industry lobby of most global airlines, has flagged concerns over the levy of goods and service tax (GST) on branch offices of foreign airlines in India.

Multiple international airlines, including Emirates, British Airways and Lufthansa, are being served notices over import of services by their Indian branch offices, The Economic Times reported on Tuesday, 6 August. The notices are for the period when GST was rolled out in July 2017 till March 2024.

India’s 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.

The industry lobby called the move by DGGI, which is the Indian finance ministry’s law enforcement wing responsible for fighting tax evasion, as flawed, while calling for a clear and consistent policy in line with the global framework.

“IATA is disappointed that India’s Directorate General of GST Intelligence has proceeded to issue show cause notices to some foreign airlines operating to India, despite a number of representations made by the industry on this matter,” Xie Xingquan, Iata’s regional vice-president for North Asia and Asia-Pacific, said in a statement.

The DGGI had launched a probe into the matter in August 2023, which included conducting searches at the offices some airlines in October 2023.

“DGGI’s assertion that GST should apply to expenses incurred by the headquarters of foreign airlines (with a branch office in India) in the course of providing air transport services is flawed. It does not take into consideration the nature and conventions involved in the provision of international air transport,” the Iata statement said.

“India is alone in its approach – nowhere else around the world is this practiced. Indian carriers operating to destinations outside India do not face similar situations or demands. The international nature of air transport necessitates a clear and consistent policy framework globally,” the statement said, adding that Iata “continues to work closely with the government of India on this subject.”

At a roundtable in June during the lobby’s annual general meeting in Dubai, Iata director general Willie Walsh had highlighted concerns over the potential withdrawal of international airlines from India due to tax intricacies, including double taxation risks, Mint had reported.

According to CNBC, which cited unidentified people aware of the development, Emirates owed about $900 million in unpaid taxes, followed by Etihad Airways with about $197 million and Saudia at about $73 million.