DGGI conducts searches at India offices of Qatar Airways, Etihad, Emirates, other foreign airlines: Report

GST Intelligence teams have reportedly searched India offices of foreign carriers for alleged tax evasion on account of the import of services from head office by Indian branch offices. According to a report in CNBC-TV18, Directorate General of GST Intelligence (DGGI) officials have conducted search operations at Etihad, Emirates, Saudi Airlines, Qatar Airways, Air Arabia, Oman Air, and Kuwait Airways.

DGGI has reportedly alleged that "tax evasion by these carriers is on account of import of services from head office by Indian branch offices."

Sources quoted in the report said: "Airlines were booking expenditure such as lease rental, crew charges, fuel charges, etc., to their head office and were not charging the same to the Indian office."

As per Goods and Services Tax (GST) terms and clauses, the establishment of a company in India and its counterpart outside the country are treated 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.

According to Schedule 1 of the Central Goods and Services Tax (CGST) Act, even if there is a supply without consideration within a company's head office and branch office, it is deemed as a supply for tax purposes.

“The import of services are subject to tax under reverse charge when there is an actual receipt of import service and in many cases only for administrative convenience, the expenses are booked either at head office or branch or vice versa,” said Abhishek A Rastogi, founder of Rastogi Chambers, told CNBC TV18.

The Finance Ministry in a statement on Wednesday has said that DGGI has detected GST evasion of Rs 57,000 crore from April 2020 to September 2023 involving over 6,000 fake instances of input tax credit (ITC) claims leading to the arrest of 500 people.

In the current financial year (2023-24), 1,040 fake ITC cases involving Rs 14,000 crore have been detected and a total of 91 fraudsters apprehended, it said.

“Since June 2023, DGGI has laid special emphasis to identify and apprehend the masterminds and disrupting syndicates, operating across the country,” it said.

It added that DGGI initiated a special drive against the practice of claiming fake ITC to plug the leakage in the government’s revenue from 2020.

Cases have been unraveled using data analysis aided by advanced technical tools which have led to the arrest of tax evaders.

“These tax syndicates often use gullible persons and enticed them with job/commission/bank loan etc. to extract their KYC [know your customer] documents which were then used for creation of fake/shell firms/ companies without their knowledge and consent,” it said.

To tackle the menace of GST evasion, DGGI develops intelligence, especially in new areas of tax evasion, through advanced tools for data analytics besides using its intelligence network across the country to collect such information, the statement said.

“Overall in FY2023-24, Rs. 1.36 lakh crore has been detected as overall GST evasion (including fake ITC) and voluntary payment of Rs 14,108 crore has been made for the same,” it said.

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