Allow airlines to use accumulated GST credit
- Jun 22, 2020 | Divita S Gupta
India’s aviation industry which was expecting some tax relief after the 40th GST council meet was in for a disappointment as the Centre made no such announcements. Experts are now making recommendations for utilisation of input tax credit by airlines which are currently forced to bear the brunt of paying their liabilities using cash. Several major airlines in India are facing cash flow issues because their working capital is stretching to a breaking point. Airlines are bearing the dual burden of paying GST dues in cash even as input tax credits keep piling up. ITC for airlines continues to get accumulated because of GST payment on fixed charges including airport usage, lease rentals for aircraft, etc. Even though they have ITC accumulated in their electronic cash register, these airlines are required to pay GST liability in cash due to the reverse charge mechanism. As per laws prescribed under the GST framework, the tax liability on input services and raw materials for making a product for providing a service is passed on to consumers when they buy services. But due to the reverse charge mechanism, the GST on raw materials and input services must be paid first, and in cash. With planes grounded due to the pandemic and subsequent lockdown, the final consumer is not making any purchases - leaving airlines in a lurch. In a bid to provide some relief to the aviation sector experts are recommending the utilisation of accumulated GST credit. Experts have suggested that the Centre should discharge a liability under the reverse charge through the accumulated credit for a specific period.