British Airways, Lufthansa, Emirates Among 10 Foreign Airlines Accused By DGGI Of ₹10,000 Cr Tax Evasion

The Directorate General of Goods and Services Tax Intelligence (DGGI) has targeted 10 foreign airlines with show cause notices, accusing them of a ₹10,000 crore tax evasion. The airlines under scrutiny include major players such as British Airways, Lufthansa, Oman Air, Emirates, and Singapore Airlines.

Foreign Airlines Accused By DGGI Of  Tax Evasion

According to reports by The Economic Times, the DGGI issued these notices over three days. They alleged that these airlines failed to pay taxes on services imported by their Indian branches from their headquarters. This tax liability pertains to the period from July 2017, when the Goods and Services Tax (GST) was introduced, until March 2024.

The core issue revolves around the valuation of services provided by the foreign airlines. The DGGI has clarified that the airlines do not benefit from a circular issued on June 26. This pertains to the valuation of service imports from related entities. This circular allows for full input tax credit, but officials state that airlines are excluded from this relief.

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Exempt And Non-Exempt Services

The key contention is that airlines offer both exempt and non-exempt services. As a result, they cannot take advantage of the benefits provided under the June 26 circular. Moneycontrol News reported that the DGGI had earlier asked for a detailed breakdown of exempt versus non-exempt services from these airlines. However, only four out of the ten airlines have complied with this request.

According to The Economic Times, the DGGI asserts that GST applies to services like aircraft maintenance, crew payments, and rentals provided by airlines’ overseas headquarters to their Indian branches. Since these services are exchanged between legal entities, the tax should be applied. The DGGI claims that the airlines have not met their GST obligations.

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Moneycontrol News reported that the issue first emerged in August 2023, sparking a debate over the taxation of these services. Foreign airlines argue that tax liability should cover only the portion of services used in India, as they involve head offices and branches. They raised this concern with the embassies and referred it to the GST Council’s fitment committee.

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