Foreign Airlines can breathe easy as Central Board of Indirect Taxes & Customs (CBIC) has notified exemption from GST on services provided by headquarter to branch office here. It has also notified exemption on research and development grant to an educational institution in India.
The notification is based on recommendations made by GST Council in its meeting held on September 9. It recommended to exempt import of services by an establishment of a foreign airlines company from a related person or any of its establishments outside India, when made without consideration. The council also recommended to regularise the past period on ‘as is where is’ basis.
Now the notification has set October 10 for implementation of this change. It will be applicable provided that GST at applicable rates is paid by the establishment of the foreign airline company in India on transport of goods and passengers as may be applicable. Also, a certificate from the Civil Aviation Ministry will be required which will state that the establishment of the foreign company in India is that of an airline company which has been designated by the foreign government under the applicable bilateral air services agreement with India.
Also, the certificate needs to mention that on a reciprocal basis, designated Indian airlines are not subject to levy of similar taxes by whatever name called for the same services appearing under the entry, by the Government of the country designating the foreign airline company.
The issue became contentious as early this year DGGI (Director General of GST Investigation) had issued show-cause notices to 10 major foreign airlines with a demand of ₹10,000 crore. Now, all these demands will be regularised.
The same notification also prescribed exemption for supply of research and development services by a Government Entity, a research association, university, college or other institution, notified under IT Act using Government or private grants. The GST Council had recommended that past demands to be regularised on ‘as is where is’ basis.
Earlier, Finance Minister Nirmal Sitharaman had said that that R&D grant to three categories of research institution, college or university will be exempted from GST. These include recognition under State laws, Central Laws or one which has got exemption under Income Tax. The exemption will be available to both government as well as private institutions and there will be no threshold, she said.
Explaining it further, Revenue Secretary Sanjay Malhotra said that as many as seven educational institutions and universities across India received GST show-cause notices from the Directorate General of GST Intelligence (DGGI) in August, demanding unpaid taxes amounting to ₹220 crore. Now, “past demands to be regularised on ‘as is where is’ basis”.