Aviation, Hospitality and Travel Companies Face Trouble With GSTTop Stories

June 18, 2020 13:42
Aviation, Hospitality and Travel Companies Face Trouble With GST

(Image source from: livefromalounge.boardingarea.com)

With the pressure in the economy due to the pandemic, there is too much burden on aviation, hospitality and telecom industries to pay Goods and Services Tax dues in cash as input tax credits keep adding up.

The working capital and cash flow problems are expanding the working capital at these companies and there are several cash-flow problems.

Abhishek Jain, tax partner form EY says, "An embargo on the utilisation of input tax credit for payment of reverse charge liabilities has been a matter of financial stress perpetually for businesses. With the current pandemic, this concern has only worsened and businesses have been strenuously representing to the government for some relief on this aspect - specifically businesses with fixed committed costs involving a reverse-charge levy,”

Even the buyers would bear the burden for paying taxes on certain services and raw materials that are used for making the product. As per the GST framework, the cost is revised and then passed on to consumers when they buy these services.

First, the GST on input services and raw material has to be paid and reverse charge liability has to be paid in cash. Due to the pandemic, many companies are facing a difficulty on the GST cost to consumers. Plus, industry trackers say that they have to pay raw materials and input services in cash.

Example, in airline companies, GST is paid on fixed charges such as airport usage, lease rentals for aircraft, etc. as their input credit gets collected. Even though there is credit, they are still bound to pay GST in cash on a reverse charge basis and the foreign aircraft lessors are paid on the lease rents.

At the expense of accumulating credit, they end up paying out cash. To complete the RCM payments through accumulated input tax credit, these industries need a relief from the Government.

Telecom payers have to pay on the Government charges and airlines have to pay reverse charge liabilities to pay foreign parties on lease of aircrafts. Multinationals have to pay tax on royalty for brand, technical knowhow, IT, management and others.

By Neha Makhija

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Tagged Under :
GST  Aviation  Telecom and Hospitality