The finance ministry has assured airlines that confusion over the applicability of the goods and services tax (GST) on imported aircraft that resulted in double taxation will be sorted out soon and a clarification will be issued at the GST Council meeting likely to be held next month.
The matter is related to taxation on aircraft imported before July 8.
“Basis that assurance from the finance ministry, we have got our aircraft approved on Saturday. We have given a letter of undertaking, which says that we will pay if the government does not issue a clarification in the next GST Council meeting,” said a senior Air India official, who did not want to be identified.
Apart from Air India, one aircraft each of IndiGo, Vistara and AirAsia India are stuck because of the confusion, as are planes of other airlines. “Our aircraft is still stuck as we await clarity on it from the government,” said a senior executive of an airline whose aircraft is still awaiting clearance. The next GST Council meeting is likely to be held on August 8, 2017. The council makes recommendations on matters related to the tax.
ET reported on Saturday that aircraft are stuck due to lack of clarity on taxes to be charged on planes imported between July 1, 2017, and July 8, 2017. The GST regime, which came into effect on July 1, allowed taxation on cost of aircraft at the time of import and on lease rentals. The government clarified on June 8 that only one of the charges would be applicable.
The circular, however, did not say whether the clarification would be applicable from the day GST came into force or from the day of the clarification.
Due to the confusion, the customs and excise department sought a 5% levy on the total cost of the aircraft and another 5% GST on lease rentals on aircraft imported within that period.
The airlines refused to pay the taxes and took up the issue with the government, leading to revenue losses because of inability to deploy the aircraft.