Expect Major GST Relief for Foreign Airlines and Shipping Lines After Elections

In a significant move to bolster the ease of doing business, the Indian government is set to relax the Goods and Services Tax (GST) regulations for foreign companies operating in India. A senior government official revealed that within 100 days following the elections, foreign airlines and shipping lines will be granted an exemption from paying GST at the time of importing services. Instead, these companies will be permitted to pay GST upon the provision of services.

Under current GST legislation, related party transactions—which involve the transfer of goods or services between related entities—are subject to an 18% tax and stringent compliance measures. The proposed relaxation aims to alleviate the compliance burden for foreign entities, particularly those in the aviation and maritime sectors, which often import supplies from their overseas parent companies.

The tax department has previously issued notices to several foreign airlines, including Finnair, KLM Royal Dutch Airlines, Qatar Airways, and others, for failing to pay GST on imported services. The forthcoming changes are expected to provide compliance relief for these companies, allowing them to defer GST payments until services are rendered, provided they are eligible for full input tax credit (ITC).

The official stated that the GST fitment committee would examine the issue in detail, and any necessary legal amendments would be considered. The matter is slated for discussion before the GST Council shortly after the general elections.

This policy adjustment is anticipated to reduce the administrative burden on foreign firms and streamline the tax payment process, aligning with the government’s commitment to fostering a more conducive business environment.