IATA Raises Concerns Over India’s Tax Charges on Airlines

The International Air Transport Association (IATA) has expressed serious concerns regarding recent court orders issued to ten member airlines by India’s tax authorities, amidst allegations of tax evasion on imported services. This development, covered extensively by local news outlets, has sparked controversy within the aviation industry.

According to reports from The Economic Times, India’s Directorate General of Goods and Services Tax Intelligence (DGGI) has issued show cause notices to several major airlines, including British Airways, Lufthansa Cargo, Oman Air, Emirates, Singapore Airlines, Etihad Airways, Saudia, Air Arabia, Thai Airways International, and Qatar Airways. These airlines are accused of not paying Goods and Services Tax (GST) on services imported from their head offices to their Indian branch offices, covering the period from July 2017 to March 2024. The alleged unpaid GST amounts to over INR105 billion (USD1.2 billion). The DGGI began its investigation in August 2023, followed by office searches in October 2023.

IATA’s regional vice president for North Asia and Asia Pacific, Xie Xingquan, criticized the DGGI’s actions, stating that the application of GST to expenses incurred by foreign airlines’ headquarters is inconsistent with international standards. IATA is urging the Indian government to reconsider this approach, which could negatively impact the growth of India’s aviation sector. In a statement, Xie Xingquan expressed disappointment, noting that the DGGI’s assertion that GST should apply to expenses incurred by the headquarters of foreign airlines in the course of providing air transport services does not consider the nature and conventions involved in international air transport. Furthermore, India is unique in this approach, as no other country practices this method. Xie highlighted that Indian carriers operating internationally do not face similar demands.

During the IATA Annual General Meeting in Dubai in June, Director-General Willie Walsh warned of potential consequences, including the possibility of international airlines withdrawing from India due to complex tax regulations and the risk of double taxation. This situation could significantly affect India’s position in the global aviation market.

According to CNBC, citing anonymous sources, the alleged unpaid taxes for each airline are substantial: Emirates is reportedly facing INR75.5 billion (USD899.3 million) in unpaid taxes, while Etihad Airways faces INR16.6 billion (USD197.7 million). Other airlines with significant amounts include Saudia with INR6.12 billion (USD72.9 million), Air Arabia with INR4.55 billion (USD54.2 million), and Oman Air with INR710 million (USD8.4 million). Thai Airways is reported to owe INR600 million (USD7.1 million), Qatar Airways INR530 million (USD6.3 million), Singapore Airlines INR400 million (USD4.7 million), British Airways INR330 million (USD3.9 million), and Lufthansa Cargo INR100 million (USD1.1 million).

IATA continues to engage with the Indian government, advocating for a resolution that aligns with global practices and supports the robust potential of India’s aviation sector. The association emphasizes the need for a clear and consistent policy framework to ensure the healthy growth of international air transport in India.

Sources: AirGuide Business airguide.info, bing.com, ch-aviation.com