Several foreign airlines, including Lufthansa, Emirates and British Airways, have declined to provide data sought by the Indian Goods and Services Tax (GST) authorities pertaining to ongoing investigations, said people with direct knowledge of the matter.
The director general (DGGI) of GST had sought data pertaining to a probe into the valuation of services provided by the foreign airline to their Indian arms. However, the airlines are learnt to have told the authorities that they do not maintain such granular data, according to people cited above.
The GST authorities had late last year sent notices to 10 prominent foreign airlines over alleged underpayment of taxes. The cases pertain to practices reportedly followed by these airlines to book India-related expenses from their overseas headquarters. Expenses on the DGGI radar include costs incurred for leasing of aircrafts, supplies provided and crew maintenance costs.
The Indian authorities have taken a view that these costs come under the GST ambit in India. However, foreign airlines have been arguing that it is a common practice in the aviation industry for the headquarters to book such expenses and provide these services to local arms.
“The airlines have informed that the data sought by the DGGI is not maintained by them and have not provided the data so far,” said a person cited above. “They have also argued that globally such services are not taxed and hence they should be given relief in India too.”
Emails sent to Emirates and British Airways remained unanswered. “We are closely cooperating with the authorities, and we hope that there will be a workable solution for the industry.” said a Lufthansa spokesperson in response to Moneycontrol’s queries.
The airlines have also started tapping diplomatic channels by making representations through their embassies to resolve these pending notices, said people cited above. They have also reached out to industry bodies including International Air Transport Association (IATA).
Last month, IATA Director-General Wille Walsh had expressed concerns over tax issues facing airlines in India, according to media reports. He had said the airlines were concerned and this may even lead to some of the foreign carriers to exit India. He cited complexity of tax rules, extent of taxes and risks of double taxation as key risks for foreign airlines in India.
“The airlines have made representations through their embassies and the matter is being examined by the concerned ministry,” a person cited above said.
Not just foreign airlines, the DGGI is also probing international shipping companies for similar violations. GST rules say any services provided within a company to separate entities is also subject to tax.
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