GST (Goods & Services Tax) implementation has brought different types of reactions from different sectors. The ongoing discussion about the increased cess on cars has not ended and the transportation sector is ready to discuss yet another impact of GST.
The air transport sector has raised its concerns about increased operational cost after the implementation of GST. This comes at a time when the sector is already struggling on top of decreasing revenues and increasing working capital. The airline companies have sought GST relief from the government, failing to which, might lead them to increase the airfare in the coming time.
The Economic Times quoted one of the senior industry executives saying that the latest GST implementation will put an additional load of over ₹4750 crores on the airline companies and it will badly hit the profits. The increased cost of operations will also impact the industry and as a result, they will be forced to increase the airfare to recover the increased expenditure. According to analysts, Indigo, Spicejet and Jet Airways, India’s 3 listed airline companies, had a cumulative profit of ₹2,479 crores in the financial year 2016-17. Among the other airline companies operating in India, only GoAir has been under profits. The other players in the sector include Air India, Air Asia, Air Costa, Vistara etc.
According to the industry executive mentioned above, implementation of GST will impose taxes on re-import of the engine and spare parts of the aircraft after their service abroad. The industry has criticised the move stating that India does not have any option of the repair of spare parts of aircraft and the companies are forced to send them abroad. At the same time, a number of aircraft engines are stuck with the customs because of the increased levies after GST implementation.
The government has been talking about promoting the Indian companies, however, such moves will only help the foreign airlines who do not have their businesses registered as Indian entities. Another industry executive stated that the rate of 28% GST on the import of spare parts will dig a big hole in the pockets and the companies will need to look for alternative ways to reimburse the losses. After this move, airline companies will have just a couple of options, either to get indebted or to survive with the increased fare. Both the cases will provide a huge advantage to the foreign players, which is not in line with the government’s plan to promote schemes like make in India and startup India.
According to reports, the airline companies did approach the government to intervene in the same, however, they were asked to seek help from the GST Council. Sources in aviation ministry said that the ministry is aware of the challenges faced by the companies and will look to address them on the right platform.