New Delhi: The Directorate General of Goods and Services Tax Intelligence (DGGI) has sent showcause notices to 10 foreign airlines operating in the country, for alleged non-payment of tax amounting to Rs 10,000 crore, officials said. They include British Airways, Lufthansa, Oman Air, Emirates and Singapore Airlines, they said. The notices, sent over the past three days, deal with unpaid tax dues on the import of services by Indian branches from head offices, officials said.

Airlines are not covered by a June 26 circular on valuation of supply of import of services by a related person, where the recipient is eligible for full input tax credit, an official said.

This is the circular cited by Infosys following a recent integrated GST demand amounting to Rs 32,000 crore.

Airlines deal in both exempt and non-exempt services and that makes them ineligible under the circular, the official said. DGGI had earlier sought a segregated list of exempt and non-exempt services from airlines. “Of the 10, only four airlines provided the list and the rest failed to furnish any explanation,” the official said.

The notices are for the period from July 2017, when GST was rolled out, to March 2024.

The carriers did not respond to ET’s queries.

A senior official said overseas headquarters of these airlines were providing services such as aircraft maintenance, as well as payments for crew and rentals. DGGI says these services are offered from one legal entity to another, and are therefore liable for GST, which the airlines have not paid.

Applicability Debate

A probe into the matter was initiated in August 2023. DGGI had summoned key executives from the India offices of these airlines in December last year and January this year, seeking explanations and the list of services that were tax-exempt.

Foreign airlines argued that as the place of service was both head office and branch office, airlines could only pay GST on what was taxable in India. They also approached their respective country’s embassies, which flagged the concerns to the finance ministry. ET reported this on June 18.

Subsequently, the issue was referred to the fitment committee under the GST Council. The council had approved the June 26 circular, clarifying the valuation of the “supply of import of services” by a related person.

However, experts said the circular doesn’t cover airlines’ issues. “The circular falls short of addressing the concerns of foreign shipping lines and airlines,” said Saurabh Agarwal, tax partner at EY. “Given their unique business models, involving a mix of taxable and exempt supplies, some companies in the sector may not qualify for this relief.”