Saturday, July 08, 2017

GST impact: Airlines, cab aggregators grapple with higher lease payouts

New Delhi: Under the new indirect tax regime, leasing of goods is regarded as a service and attracts the goods and services tax (GST). This has created complexities for airlines, cab aggregators and cab leasing companies, even as they grapple with teething issues of implementation of the GST.

Among the many issues faced by airlines, the anomaly in terms of input tax credit for economy class and dual taxation on aircraft leasing top the list. According to the rules, while input credit arising from procurement of both goods and services can be used in case of business class, input credit from services alone can be used for off-setting tax liability with respect to economy class travel.
"Similar to business class, full input tax credit should be given to economy class ticketing too," said a senior airline executive.
The airlines have also raised the issue of dual taxation on aircraft leasing. Under the new norms, aircraft leasing will attract a dual levy — once at the time of import as Customs duty and again when lease rentals are paid as GST on services.
Under the previous taxation system, cross-border aircraft leases by scheduled airlines were not subject to Customs duty, central excise and value-added tax (VAT).

"We have sought continuation of the tax exemption. The impact is largely related to cash flows, as we will be able to claim an input credit against tax liability on sale of tickets and cargo space," said a senior executive from Air India.
Air India pays a lease rent of around $350,000 for its narrow-body Airbus aircraft and around $1 million for its wide-body Boeing 787 aircraft.
08/07/17 Arindam Majumder Karan Choudhury & Ajay Modi/Business Standard