GST: Big GST Relief for International Airlines and Shipping Lines Ahead After Elections
The Government of India is planning on easing the related party transaction clause for foreign companies in India under GST.
This is expected to take place within 100 days of the elections, exempting airlines and shipping lines from paying GST on service imports. According to senior government officials, this move allows paying at the time of disbursal of services.
A related party transaction is the transfer of goods or services between organizations that share common ownership or management, as per GST laws.
All Companies including shipping lines and airlines with related party transactions import supplies from their outside India parent companies. 18% rate is taxable at related party transactions under GST and for foreign companies, its compliance is very tough.
The government is considering relaxing regulations to make running a company easier and reduce compliance.
Relief considered by the Government
As GST evolves, related party transactions are likely to provide compliance relief for businesses. The government is currently looking at exempting GST payments for related party transactions that qualify for full ITC (input tax credit).
Payment of GST will be allowed later at the time of discharge of services to subsidiary companies.
The GST Fitment Committee will look into this issue in detail and will present it before the council after the general election ends.
The majority of the airlines reported saying that they planned to pay the GST demand instead of disputing the tax demand and claiming the entire amount as ITC later.
Implication of Relief
If or when a subsidiary Indian company imports services from its parent company without paying GST, the tax authorities will discover it and issue a demand notice.
The considered supply is taxable at 18% and the business may earn an input tax credit later when it makes additional supplies.
However, if an Indian company does not pay GST on the import of services and pays the entire tax later when the services are supplied, the tax authority should not be bothered.
