GST Impact on Aviation Sector

By | October 21, 2016
(Last Updated On: October 21, 2016)

GST Impact on Aviation Sector

Increase in Prices of Air Tickets

Currently, air travel attracts service tax at an abated rate of 6% for economy travel and 9% for non-economy travel.  A Proposed GST rate of 18% may lead to a 9% to 12% increase in the cost of air travel for passengers, thus hampering the growth of the industry.

Increase on Input Cost

Under the proposed GST regime, the carriers will not be able to take credit of taxes paid on aviation turbine fuel as the same has been kept outside the GST regime which will result in further increase in input costs and increase in ticket prices.

Cost of Aircrafts may go up

Presently import of aircrafts in India for providing scheduled air transport services is exempt from payment of customs duty on account of customs duty exemptions. Under the proposed GST, if this exemption is not continued then cost of Aircraft may go up.

Leasing of aircrafts may be costly

At present import of aircrafts in India under operating lease model does not attract customs duty. Under the finance lease arrangements, service tax is applicable only on 10% of lease rentals.

At proposed 18% GST rate it is likely that costs of such aircrafts imported/procured under lease arrangements may go-up.

Maintenance, repair and overhaul services 

At present, both VAT and Service tax is applicable on maintenance activities undertaken in India (referred to as ‘works contract’). This has resulted in higher tax burden for the maintenance, repair and overhaul industry.

Under the proposed Model GST Law , it is expected that works contract transactions which involves supply of goods and services would be treated as ‘pure service transactions’ for levy of GST and thus provide the relief to the Aviation sector from cascading effect of taxation.

Presently maintenance and repair of aircraft undertaken outside India do not attract service tax.

under proposed GST, it is expected that services of maintenance and repair of aircraft rendered by both overseas as well as Indian service providers would attract GST, irrespective of the place of performance of such maintenance and repair activities

Import of Aircraft parts may be costlier

Parts/ spares imported into India for use in repair/ maintenance of the aircraft are currently exempt from levy of customs duties. If this exemption is not continued under GST then  import of parts will be costlier.

Free Education Guide on Goods & Service Tax (GST)


SR No

Topic -GST

Resources

1

Model GST Law

Model GST Law

2

GST Overview

Goods and Services Tax (GST): An Overview

Integrated Goods & Service Tax (IGST) Act Overview

Meaning and Scope of Supply

Time of Supply

Place of Supply of Goods and Service under GST

Valuation in GST

Levy of GST & Exemption from Tax

Job Work under Goods & Service Tax (GST)

Electronic Commerce under Goods & Service Tax (GST)

3

Transition to GST

Transitional Provisions in Goods & Service Tax (GST)

4

Registration

GST Registration FAQ’s

GST Registration Process -Video

GST -Draft Registration Rules

GST -Draft Registration Formats

5

Invoice

GST Draft Invoice Rules released by CBEC

GST Draft Invoice formats Released by CBEC

6

Input Tax Credit

Input Tax Credit under Goods & Service Tax (GST)

Concept of Input Service Distributor in Goods & Service Tax (GST)

7

Payment

GST Payment of Tax

GST Draft Payment Rules Released by CBEC

GST Draft Payment formats Released by CBEC

8

Refunds

Refund under GST

Draft GST Refund Forms released by CBEC

Draft GST Refund Rules released by Govt

9

Returns

Returns Process and matching of Input Tax Credit under GST

Draft GST Return Rules Released by Govt

Draft GST Return Formats released by Govt

10

Assessment and Audit

Assessment and Audit under GST

11

Inspection, Search, Seizure and Arrest

Inspection, Search, Seizure and Arrest under GST

12

Offences, Penalty, Prosecution & Compounding

Offences, Penalty, Prosecution & Compounding in GST

13

Demands and Recovery

Demands and Recovery under GST

14

Appeals and Review

Appeals, Review and Revision in GST

15

Advance Ruling

Advance Ruling in Goods and Service Tax (GST)

16

Settlement Commission

Settlement Commission in Goods and Service Tax (GST)

17

GST Portal

Frontend Business Process on GST Portal

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