The newly-implemented indirect tax regime of India will hit the aviation industry hard. “The airline industry will be hit by ₹5,700 crore per annum and the GST will make the flourishing sector sick. The Indian carriers will become globally uncompetitive as it will give huge benefit to competing airlines, especially from the Gulf,” the Federation of Indian Airlines (FIA) said in their submission to the Finance Ministry.
The airlines added further that GST is entirely against the objective of “affordability and sustainability” which is stated in the National Civil Aviation Policy 2016 and UDAN (a regional connectivity scheme) released in the previous year.
In addition to this, the airlines have also demanded that the Integrated Goods and Services Tax should not be charged on re-import of repaired airplane parts and engine, inter-state movement of goods for captive intake and import of serviceable parts under the service exchange program.
A tax of 18 percent is being charged on re-import of aircraft spare parts which were exempted from import duty and service tax in the pre-GST era. An airline executive said, “The GST paid on repairs carried out in India is creditable but not if it takes place abroad. With no engine repair shop in India, it is imperative to send the spares abroad. This will cost ₹2,000 crore per annum to the industry.”
Airlines shared their concerns with the ministry by saying that GST is being levied on the transfer of aircraft spares, which are stocked in central stores, between states on a regular basis. “This move will threaten the survival of airlines and will impact us by ₹3,000 crore a year as no input tax credit is available. We demanded GST exemption on stock transfer for captive consumption,” the executive added. The excessively high IGST rates on imports of purchased aircraft parts is a cause of worry which might lead to a massive impact of INR 350 crore every year.
The seats, parts, and batteries of aircrafts are being taxed at 28 percent while the nut bolts, engine and motor is being charged at 18 percent. A tax of 5 percent is being levied on landing gear and propellers.