IAF asked to pay Rs 100 crore GST bill for import of spares

Published: July 22, 2019

The Indian Air Force which is facing fast depleting squadrons and is yet to induct aircraft in significant numbers to keep up with falling fleet numbers is now facing issues in the import of spare parts for its existing fighter aircraft fleet.

What has happened?

  • Most of the Indian Air Force fleet is made up of aircraft of foreign origin and the IAF has to routinely import spare parts to keep these aircraft flying.
  • However, the imposition of the GST has complicated the calculations of the IAF as the GST bills on the imported bills have piled up and now the IAF is locked in a tussle with the Directorate of Revenue Intelligence (DRI).
  • The IAF has requested the DRI to reconsider the Rs 100 crore of integrated goods and services tax (IGST) which it has levied on various imported items that it has shown as parts of aircraft in its books.

Why this has happened?

  • The IAF s is of the view that these items which are electrical and mechanical parts, antennas and electronic spares fall under customs tariff heading 8803 which attract nil or 5% IGST.
  • The DRI contends that these imported accessories are not parts of aircraft which are exempted under the harmonized system nomenclature (HSN) code followed by GST while classifying the goods in five slabs: nil, 5%, 12%, 18% and 28% and hence the IAF needs to pay the IGST on it.
  • These items are routinely charged for aircraft. However, while the commercial aircraft are used for air transport, IAF aircraft is mainly used for defense purposes and hence, IAF should get an exemption.

What happens now?

The DRI says that the government agencies are also required to pay IGST on imports. The IAF can pay the tax and then claim it back from the government. The duty needs to paid as it helps the government to have better accountability of its expenditure.

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