DGGI summoned Indian executives of airlines
MUMBAI: The Goods and Services Tax (GST) authorities have issued show-cause notices to ten foreign airlines operating in India, alleging tax evasion amounting to Rs10,000 crore. The airlines in question include British Airways, Lufthansa, Oman Air, Emirates, and Singapore Airlines, according to reports from the Directorate General of Goods and Services Tax Intelligence (DGGI).
These notices, sent over the past three days, address unpaid taxes on services imported by the Indian branches of these airlines from their respective head offices. The DGGI officials explained that the notices pertain to services provided from July 2017, when GST was introduced, up to March 2024.
An official clarified that the airlines are not covered by a June 26 circular that pertains to the valuation of imported services when the recipient is entitled to a full input tax credit. This circular, referenced by Infosys in a recent GST demand of Rs32,000 crore, excludes airlines due to their provision of both exempt and non-exempt services. The DGGI had previously requested airlines to provide a detailed list of these services. Of the ten airlines, only four complied, while the remaining six failed to provide explanations.
Airlines argue they don’t come under GST
The DGGI investigation, which began in August 2023, involved summoning key executives from the Indian offices of these airlines in December and January for explanations and service lists. Foreign airlines have argued that GST should apply only to taxable services within India, given the involvement of both the head office and the branch office. They have also contacted their respective embassies, which escalated the issue to the finance ministry.
In response, the matter was referred to the GST Council’s fitment committee, which issued a circular on June 26 clarifying the valuation of the “supply of import of services” by related parties.
No relief to Infosys in GST demand of Rs32,000cr
Separately, the Indian government is not considering any relaxation of the tax demand issued to Infosys last month.
According to a government source, the demand, in line with GST rules, remains unchanged. Infosys has requested ten days to respond after consulting with tax officials. Before the news, Infosys shares were up 1.6 percent amid a broader market rebound but briefly trimmed gains to about 0.3 per cent, ending up 1.2 percent.
India’s tax demand to Infosys amounts to over Rs32,000 crore ($4 billion) for services received from its overseas branches between July 2017 and 2021-22, representing 85 per cent of the company’s revenue for the quarter that ended June 30.
On August 3, Infosys notified stock exchanges that the demand for the financial year 2017-18, totaling Rs38,980 crore, has been resolved.
