IATA Chief warns foreign airlines may quit India over taxation issues

06 Jun 2024 CW Team

The chief of IATA issued a warning, expressing that if India does not address concerns regarding taxation, airlines might withdraw from the Indian market. In recent months, the India offices of several global airline groups have received tax evasion notices from the Directorate General of GST Intelligence (DGGI).

The airlines served notices include Emirates, British Airways, Lufthansa Singapore Airlines, Etihad Airways, Thai Airways, Qatar Airways, Saudi Arabia Airlines, and Emirates. Wille Walsh, the director general of IATA, explained that the potential withdrawal could occur gradually as airlines reduce the number of flights due to profitability concerns.

He mentioned this during the Annual General Meeting of IATA in Dubai. IATA, which has 300 airlines as members, highlighted that the notices were related to non-payment of taxes on services such as maintenance, crew payment, and aircraft lease rentals provided by airlines to their Indian entities.

In its representation to the Indian government, IATA argued that the place of service was both the head office and branch office, suggesting airlines should only pay taxes on services taxable in India, like payment for hotel accommodation used by Indian staff outside of India.

A senior airline official explained that when a foreign airline receives permission to operate in India, the Directorate General of Civil Aviation (DGCA) grants permission to the global headquarters, not the local unit. Thus, holding the local unit liable for services is a legal gray area. IATA has petitioned the government to suspend this issue.

Additionally, IATA stated that airlines' branch offices in India do not engage in crucial operations such as contracting for aircraft leases, crew, pilots, fuel, and maintenance. All operations to and from India are decided, controlled, and operated by airlines' head offices. Therefore, it is not legally accurate to attribute strategic and operational risks and functions to branch offices in India.

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