India’s decision to exempt foreign airlines from import service taxes is a significant boost for the aviation sector. The GST council’s move aligns with global practices and enhances India’s image in the industry. This change is expected to improve air connectivity, economic growth, and job creation in the country.
India’s decision to give tax exemption to import of services by foreign airlines is a big boost to global confidence in the country’s aviation sector, Willie Walsh, director general of the International Air Transport Association (IATA) said on Wednesday.
Giving a major relief to overseas carriers, the goods and services tax (GST) council on Monday decided to exempt import of services by an establishment of a foreign airline. The relief was given citing that Indian carriers get similar tax benefits abroad.
“The issue was becoming concerning for the airlines. But with this change in regulation, it looks to be very optimistic for India,” Walsh said on the sidelines of the Asia Pacific Ministerial Conference on Civil Aviation in New Delhi. He said the move will burnish India’s image in the global aviation industry.
In the past few years, major foreign airlines such as Emirates, British Airways and Lufthansa were served notices over import of services by their branch offices in India as these carriers were not covered by a circular on valuation of supply of import services by a related person, where the recipient is eligible for full input tax credit. At the time, IATA had criticised the government decision, terming it “flawed”, and called for a clear and consistent policy in line with the global framework. Walsh previously said the tax notices may result in some foreign airlines quitting the Indian market.
The IATA chief also said improved air connectivity in India will facilitate economic growth and job creation with the country reflecting the link between growth in the aviation industry and economic expansion. IndiGo will be hosting the annual general meeting of IATA next year. This is the third time the IATA AGM will be held in Delhi. The national capital had been the venue for the global airline body’s annual meeting in 1958 and 1983.
Walsh said he is very optimistic about the opportunities in the Indian aviation sector but added that the government needs to implement effective policies to unlock the country’s potential.
