IATA warns India over airline tax charges

The International Air Transport Association (IATA) has raised concerns over court orders issued to ten member airlines by India's tax watchdog in connection with alleged tax evasion for imported services, according to several local news reports.

The Economic Times was the first to report that this comes after India's Directorate General of Goods and Services Tax Intelligence (DGGI) issued show cause notices for alleged non-payment of goods and services tax (GST) worth more than INR105 billion rupees (USD1.2 billion) to the airlines. These reportedly include British Airways, Lufthansa Cargo, Oman Air, Emirates, Singapore Airlines, Etihad Airways, Saudia, Air Arabia, Thai Airways International, and Qatar Airways. The accusations reportedly relate to unpaid Goods and Services Tax (GST) on services imported from the airlines' head offices by their Indian branch offices for the period July 2017 to March 2024. The DGGI launched an investigation into the matter in August 2023, followed by searches of airlines' offices in October 2023.

In a statement, IATA's regional vice president for North Asia and Asia Pacific, Xie Xingquan, expressed disappointment with the DGGI's actions, arguing that the application of GST to expenses incurred by foreign airlines' headquarters is inconsistent with international practices. IATA has urged the Indian government to reconsider this approach, as it may hinder the growth potential of India's aviation sector.

"IATA is disappointed that India’s Directorate General of GST Intelligence (DGGI) has proceeded to issue show cause notices to some foreign airlines operating to India, despite a number of representations made by the industry on this matter," Xie said. "DGGI’s assertion that GST should apply to expenses incurred by the headquarters of foreign airlines (with a branch office in India) in the course of providing air transport services is flawed. It does not take into consideration the nature and conventions involved in the provision of international air transport. Furthermore, India is alone in its approach - nowhere else around the world is this practised. Indian carriers operating to destinations outside India do not face similar situations or demands. The international nature of air transport necessitates a clear and consistent policy framework globally. IATA continues to work closely with the Government of India on this subject. IATA has also urged the Government to urgently help resolve this matter, which can dampen and risk India’s strong aviation potential."

During a round table discussion at the IATA AGM in Dubai in June, Director-General Willie Walsh warned about the risk of international airlines withdrawing from India due to intricate tax regulations and the threat of double taxation.

According to CNBC, citing unnamed sources, the alleged unpaid taxes amount to the following: