The Union government has exempted the import of aircraft, aircraft engines and its parts via leasing route from the purview of the Goods and Services Tax (GST).
A notification from the Union Finance Ministry said that airlines will not have to pay GST at the time of import. However, lease rentals will be subject to GST.
This exemption from GST can be seen as a major relief for the aviation industry as it has been asking for relief as it was facing the dual levy of 5 per cent at the time of import and another 5 per cent at the time of payment of lease rent.
Earlier, the concerns of the aviation industry were raised by the civil aviation ministry on several occasions before the revenue department.
This body was involved in putting forward displeasure of aviation industry
The Federation of Indian Airlines (FIA) had informed the government that the dual levy on aircraft leasing, 5 per cent at the time of import and 5 per cent at the time of payment of lease rentals, will result in a huge financial burden to the airlines. Reports suggest that this double taxation would have resulted in a loss of Rs 800 crore to the aviation industry on aircraft lease.
The Federation of Indian Airlines (FIA) is an association that represents major domestic airlines IndiGo, SpiceJet, Jet Airways, GoAir and Air India.
About the previous Tax regime
In the previous tax regime, customs duty was exempt on the import of aircraft and its spares, and service tax was also not applicable on aircraft took on operating lease.
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