NEW DELHI:
Days after seeking deferment of GST rollout to September 1 on the grounds that airlines needed more time for the switchover, the aviation ministry on Thursday said it is ready for a July 1 rollout.

"Discussed preparedness with all aviation stakeholders; concerns were satisfactorily addressed. We are prepared for GST from July 1," minister of state for civil aviation Jayant Sinha tweeted on Thursday. The ministry is sending a letter to the revenue department to this effect.

Earlier this week, the ministry of civil aviation (MoCA) had asked the finance ministry to defer rollout of GST from July 1 to at least September 1 citing full service Indian carriers’ inability to switch over to the new tax regime in a month.

MoCA had also sought some changes as GST, in its current form, may favour foreign carriers that offer a onestop service to distant places over Indian airlines that fly there direct.

"For instance, Air India flies nonstop from Delhi to several places in the US like New York, Chicago and San Francisco. Gulf carriers, on the other hand, take Indian travellers to their nearby hubs in places like Dubai, Abu Dhabi and Doha and from there fly them to North America or Europe.

So the GST on the AI ticket will be for the entire India-US route while on Gulf carriers it will only be for India-Dubai route and therefore much less. Due to this, more Indians will opt for Gulf or other airlines that fly to their hubs nearby, working to the detriment of Indian carriers," said an official.

Due to this, the aviation ministry had sought that GST on air tickets be applied to the final destination and not to the first stop out of India.

MoCA took the step of writing to revenue secretary Hasmukh Adhia earlier this week after airlines apprised them of the issues. "Airlines are dependent on global distribution system (GDS)/computer reservation system for ticket bookings. Considering the compliance requirements under GST, significant amendments would be required in the GDS for generating tickets as per the GST Invoice Rules. It is therefore requested that time up to September 1 may be considered for implementation," MoCA’s letter said. The main problem in switching over to the new tax system is faced by full service AI and Jet flights that use GDS software. MoCA, in its letter, recommended four changes in GST.

Fearing that GST provisions for input tax credit and international travel may end up favouring foreign airlines, the letter says: "The full input tax credit should be extended to economy class travel also."

The reason for this demand is that GST allows only input tax credit on input services for economy class travel.

But for business travel, it allows input credit for procurement of goods also — in addition to service — like import of aircraft and its spares. Even the International Air Transport Association shared the fear of Indian carriers on this count as foreign airlines sell more premium classes of travel than desi carriers.

MoCA has also sought exemption on interstate transfer of stocks so that when aircraft spares are flown from one place (usually an airline’s engineering hub) to the place where they are required in an aircraft they do not attract a levy. "Spare parts are taken from one place to other not for resale but for replacement in an aircraft where needed. Unless amended, GST regime may make repairing aircraft costlier," said an official.

 16 Jun 2017, 07:15 AM