The government is considering easing the Goods and Services Tax (GST) rules for re-export of leased aircraft, which will give a major boost to airline financials hit by the Covid-induced unrest.
The civil aviation ministry and the finance ministry are studying a plan to ensure that the carrier does not face any hardship from customs authorities by the mandatory requirement of a no-objection certificate while exporting leased aircraft after the expiry of its lease. Don’t have to, a person familiar with the discussions said, requesting anonymity.
It aims to limit any objection to re-export of an aircraft to the extent of GST dues of the particular aircraft only rather than the entire airline.
An aircraft, when imported, attracts 5% GST, and if there are no dues on this account, there should be no objection to its re-export, as the person cited above said. The person said that any dues relating to the business operations of the airline should not be linked to this no-objection certificate.
An aircraft is to be returned at the end of its lease, and customs officials withdrawing its holding due to the leaseholder’s tax dues will have a duty on the property of the aircraft owner, which is a third party, the person said.
The decision to relax tax rules will have to be approved by the GST Council or an empowered panel of officers. Such a decision would be a shot in the hands of airlines to restructure their fleet based on the current business environment.
In its proposal to the finance ministry, the civil aviation ministry referred to efforts by some domestic airlines to revamp their lease agreements for cost savings to improve their cash flows, another person said. he said.
Questions emailed to the civil aviation and finance ministries and the Central Board of Indirect Taxes and Customs remained unanswered at the time of publication.
The move comes at a time when the industry is struggling to recover from the devastating impact of the pandemic through extensive cost rationalization. Financial performance of Indian airlines is likely to remain weak as material recovery at pre-Covid levels in passenger traffic is unlikely in the near term, credit rating agency Icra Ltd said in an analysis on Monday, following continued restrictions on international travel. Citing and tame corporate travel demands. The agency has maintained its negative outlook for the industry, highlighting low capacity utilization and a sharp rise in jet fuel prices, as the airline’s performance suffers.
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