Foreign airlines operating in India will no longer be liable to pay Goods and Services Tax (GST) on services provided by their head offices to branch offices in the country, as per a government notification issued by the Central Board of Indirect Taxes & Customs (CBIC). This decision, part of the recommendations made at the 54th GST Council meeting, will take effect starting October 10.

The exemption is subject to the condition that foreign airlines secure a certificate from the civil aviation ministry, confirming that their operations in India fall under the scope of a bilateral air services agreement. This move is expected to ease the tax burden on foreign airlines and streamline operations.

In addition to this, academic institutions that have received grants for research purposes will also be exempt from GST, further promoting research and development activities across the country.

The CBIC has rolled out several new GST-related updates, including measures aimed at reducing penalties for taxpayers. Individuals or businesses that comply by March 31, 2025, will be eligible for waivers on penalties and interest. This is particularly applicable to taxpayers facing demand orders under section 74(1) of the GST Act, as long as they have not filed an appeal.

The GST Council has also introduced a special rectification window for taxpayers to amend past input tax credit (ITC) discrepancies. This opportunity is designed to help taxpayers correct genuine mistakes made in the past, potentially resolving many pending litigations and reducing the burden on both taxpayers and the government.

Additionally, the Travel Agents Association of India (TAAI) has raised concerns over the excessive GST charges on air ticket cancellations and modifications. The association revealed that GST was incorrectly charged at 18% instead of the appropriate rates of 5% for economy class and 12% for business class, leading to an over-collection of taxes. They have urged airlines and relevant ministries to refund the excess GST that was wrongly collected.

Experts believe that the latest measures are a step towards encouraging voluntary compliance while resolving disputes outside the court system. By offering taxpayers a chance to correct their errors and reduce penalties, the government aims to streamline tax compliance and promote a more efficient system.

This series of notifications, especially the rectification of ITC mistakes, is expected to significantly reduce taxpayer grievances and litigation, creating a more taxpayer-friendly environment moving forward.