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Investigation Reveals Alleged Tax Evasion by Foreign Airlines in India

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Investigation Reveals Alleged Tax Evasion by Foreign Airlines in India

Investigation Reveals Alleged Tax Evasion by Foreign Airlines in India. GST Intelligence Teams Conduct Searches in India Offices of Foreign Airlines. In a recent development, the Directorate General of GST Intelligence (DGGI) in India has initiated investigations into alleged tax evasion by foreign carriers. The focus of these investigations revolves around the import of services by Indian branch offices from the head offices of these foreign airlines.

The DGGI has reportedly conducted search operations at the India offices of several major international carriers, including Etihad, Emirates, Saudi Airlines, Qatar Airways, Air Arabia, Oman Air, and Kuwait Airways.

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Alleged Tax Evasion Through Expense Bookings

According to sources cited in a CNBC-TV18 report, the DGGI’s investigation centers on the tax evasion practices employed by these airlines. They claim that these carriers have been engaging in tax evasion by booking expenditures, such as lease rentals, crew charges, and fuel expenses, at their head offices without reflecting these expenses in their Indian branch offices.

Goods and Services Tax (GST) Implications

The Goods and Services Tax (GST) regulations in India treat the establishment of a company within India and its counterpart outside the country as distinct legal entities. This means that transactions between a foreign airline’s head office and its Indian branch office must adhere to GST regulations. Even if a supply occurs without consideration between these entities, it is still deemed a supply for tax purposes, as stipulated in Schedule 1 of the Central Goods and Services Tax (CGST) Act.

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Tax Expert Insights

Abhishek A Rastogi, founder of Rastogi Chambers, highlighted the complexities of importing services and the subsequent tax implications. He explained that the import of services is subject to tax under reverse charge when actual import services are received. In many cases, for administrative convenience, expenses are booked either at the head office or the branch office, leading to potential tax issues.

Massive GST Evasion Uncovered

The Finance Ministry disclosed that the DGGI has detected a substantial amount of GST evasion, totaling Rs 57,000 crore, from April 2020 to September 2023. This evasion involved more than 6,000 instances of fake claims for input tax credit (ITC), leading to the arrest of 500 individuals.

In the ongoing financial year (2023-24), 1,040 cases of fake ITC, involving Rs 14,000 crore, have been identified, with 91 fraudsters apprehended.

Crackdown on Tax Evasion Syndicates

Starting in June 2023, the DGGI has intensified its efforts to identify and apprehend those involved in tax evasion. Special emphasis has been placed on disrupting syndicates operating throughout the country.

DGGI Comprehensive Approach

The DGGI has adopted a multifaceted approach to tackle GST evasion. They utilize data analysis, advanced technical tools, and their intelligence network across the country to collect information. Cases have been unraveled using these methods, leading to the apprehension of tax evaders.

Subduing Tax Evasion Menace

The DGGI is taking strict measures to combat the menace of GST evasion. They employ advanced tools for data analytics and work relentlessly to detect and prevent tax evasion, particularly in new areas. Overall, in the fiscal year 2023-24, they have identified Rs. 1.36 lakh crore in GST evasion, including cases of fake ITC, and have received voluntary payments of Rs 14,108 crore in response to their efforts.

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FAQs

Q1) What is the nature of the alleged tax evasion by foreign airlines in India?

Ans:- The alleged tax evasion centers on the import of services from the head offices of foreign airlines by their Indian branch offices. These airlines are suspected of booking expenditures, such as lease rentals, crew charges, and fuel expenses, at their head offices without properly reflecting these expenses in their Indian branch offices.

Q2) How does India Goods and Services Tax (GST) system affect transactions between foreign airlines’ head offices and their Indian branch offices?

Ans:- The GST regulations in India treat the establishment of a company within India and its counterpart outside the country as distinct legal entities. Even if there is a supply without consideration between these entities, it is deemed a supply for tax purposes. This means that transactions between a foreign airline’s head office and its Indian branch office must adhere to GST regulations.

Q3) What are the implications of the Directorate General of GST Intelligence (DGGI) investigations on tax evasion in India?

Ans:- The DGGI investigations have revealed substantial GST evasion, with the detection of approximately Rs 57,000 crore in evasion from April 2020 to September 2023. This evasion involves over 6,000 fake instances of input tax credit (ITC) claims, leading to the arrest of 500 individuals. In the current fiscal year (2023-24), the DGGI has identified 1,040 cases of fake ITC involving Rs 14,000 crore, with 91 fraudsters apprehended.

Q4) How is the Directorate General of GST Intelligence (DGGI) addressing the issue of tax evasion and what measures are they taking to combat it?

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Ans:- The DGGI has laid special emphasis on identifying and apprehending those involved in tax evasion, particularly the masterminds and syndicates operating across the country. They employ advanced tools for data analytics, and their intelligence network collects information to uncover tax evasion cases. The DGGI is committed to combating GST evasion comprehensively and has detected a total of Rs 1.36 lakh crore in GST evasion (including fake ITC) during the fiscal year 2023-24, with voluntary payments of Rs 14,108 crore made in response to their efforts.

Conclusion

The investigation into alleged tax evasion by foreign airlines in India highlights the significance of adhering to GST regulations. The government’s proactive approach to identifying and curbing evasion underscores the commitment to preserving revenue integrity.

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Qatar Airways

Qatar Airways Plans to Offer Complimentary Starlink Internet Details Yet to Be Disclosed

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Qatar Airways Plans to Offer Complimentary Starlink Internet Details Yet to Be Disclosed

Qatar Airways Plans to Offer Complimentary Starlink Internet Details Yet to Be Disclosed. In a recent development, Qatar Airways, a long-standing user of Inmarsat-now-Viasat Global Xpress (GX) Ka-band satellite-based inflight connectivity service, has indicated its intention to offer SpaceX’s Starlink Aviation onboard Internet to its passengers on a complimentary basis. This offering will be accessible to passengers with a simple “one-click” process.

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Rollout on Specific Aircraft and Routes

According to an official press release from Qatar Airways, the low-latency In-Flight Connectivity (IFC) service will be introduced on “specific aircraft and routes.” The airline has also mentioned that they are currently in the pre-launch phase of the rollout strategy in collaboration with Starlink. SpaceX Vice President of Starlink Commercial Sales, Jonathan Hofeller, has expressed that Starlink is “set to support the entire Qatar Airways fleet.”

This news emerged following the APEX/IFSA Global EXPO event in Long Beach, where Qatar Airways Group’s Chief Executive, His Excellency Mr. Akbar Al Baker, was honored with a Lifetime Achievement Award. During this event, Starlink executives met with airline representatives in a nearby hotel.

Changing Landscape in In-Flight Connectivity

The Qatar Airways-Starlink collaboration signifies a shift in the in-flight connectivity landscape. Traditional GEO satellites are being challenged by Low Earth Orbit (LEO) constellations like SpaceX’s Starlink. For example, Flexjet has announced plans to replace the Viasat hardware on some of its aircraft with Starlink.

Viasat acquisition of Inmarsat, coupled with these changes, has led to some Inmarsat value-added resellers reevaluating their positions. SITA, a service provider to Qatar Airways, has already disclosed its intention to exit the cabin connectivity market by January 2025.

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Seeking Clarity from Qatar Airways

Runway Girl Network reached out to Qatar Airways to seek clarification on several points. They inquired about:

  • Qatar Airways plan regarding the replacement of Inmarsat (now Viasat) GX inflight connectivity hardware with Starlink.
  • Whether Starlink will be deployed across Qatar Airways’ entire fleet.
  • Commencement dates for supplemental type certifications and Starlink installations.
  • Which aircraft type will be the first to receive the new hardware.
  • The impact of SITA’s decision to cease being a GX value-added reseller on Qatar Airways’ decision to select Starlink.
  • Qatar Airways’ plans for continuing to roll out Inmarsat GX on its 787-9s.

Qatar Airways Response

In response to these queries, a Qatar Airways spokesperson stated via email that they would keep Runway Girl Network updated on any future operational developments. In a follow-up exchange, when further clarity on the deal was sought, the spokesperson requested the removal of a specific phrase from their press release.

Implications and Future Plans

In the absence of comprehensive details, it seems logical for Qatar Airways to consider introducing Starlink initially on its 787-8s. This fleet has seen recent in-seat In-Flight Entertainment (IFE) upgrades but still lacks true broadband connectivity.

Once Starlink is operational on Qatar Airways aircraft, passengers can anticipate complimentary access to ultra-fast Wi-Fi speeds of up up to 350 Mbps, which can be used for various Internet-based services including video streaming, gaming, web browsing, and more. In contrast, the airline presently charges $10 for inflight access to its ‘Super Wi-Fi.

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Conclusion

Qatar Airways, in its press release, also proudly asserts its position as “the largest airline to collaborate with Starlink.” Other notable Starlink customers include Part 135 operator JSX, Hawaiian Airlines (launch delayed until early next year), airBaltic, and ZIPAIR.

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