The government on Saturday exempted the import of aircrafts, aircraft engines and other aircraft parts on lease from the goods and services tax (GST). The aviation industry had been asking for a relief as it was facing a dual levy on leasing with 5 per cent IGST at the time of import and then another 5 per cent as GST on services at the time of payment of lease rental.
Under the previous taxation regime, customs duty, VAT and service tax were not levied on cross-border aircraft leases. The airlines were also opposing the dual levy because of anomaly in the structure for availing input tax credit for leased aircrafts. According to the GST-related laws, airlines can avail input tax credit for taxes paid on procurement of both goods and services in case of business class, but can offset the input tax liability only for services in the case of economy class travel.
Abhishek Jain, Tax Partner, EY said: “This would bring huge relief to the airline industry by resolving the issue of dual levy of GST; specially for the reason that GST paid at the time of import was not creditable against economy class travel,”