Indian carriers have warned the government that flying may become a lot more expensive for passengers and the business unsustainable for several airlines under the proposed GST regime.
The airline industry made a presentation before the GST Council this Tuesday (January 3) where it pointed out that at present there is no tax or duty on import of aircraft, aircraft engines and spare parts but the same will be taxed under GST.
“Lease rental of aircraft, engines and parts subjected to GST. Globally no VAT GST is applicable on leasing or import of (these things). This will lead to substantial increase in working capital requirements and financing costs (for airlines). It will result in losses of over Rs 800 crore per annum to airlines and result in over Rs 500 crore per annum cash flow blockage in excess GST credit.
There will be an incremental impact of over Rs 3,500 crore per annum if aircraft import is also subjected to GST,“ the presentation made in presence of FM Arun Jaitley says.
Indian carriers are expected to add about 100 planes to their fleet in next 3-4 years and the impact of taxation on them could be huge. “While some financially weak airlines will find it hard to survive the blow, others will have to pass on the increased cost to flyers that will lead to sharp hike in airfares,“ said an airline official.