Vijay Mallya's Kingfisher Airlines (KFA) continues to default on its service tax outstandings, amounting to over Rs 60 crore.
"KFA continues to be a defaulter and has an outstanding of over Rs 60 crore. It is defaulting on the weekly payments and most of its bank accounts are frozen," Mumbai Service Tax Commissioner Sushil Solanki said.
The government's recent move to allow foreign direct investment (FDI) in the civil aviation sector now seems to be the "only ray of hope" to recover the dues from the debt-ridden airline.
With service tax department having frozen almost all its accounts, the airline - already operating on a skeletal schedule due to drop in services - is finding it hard to pay its dues as cash flows are down to a trickle.
KFA has not been depositing service tax collected from passengers with the department since November 2011 on a regular basis and instead has been diverting it for other purposes on a regular basis.
PERSPECTIVE:FDI may not provide easy lifeline to Kingfisher
As the airline started defaulting on tax payment, the department started freezing its bank accounts.
The Vijay Mallya-promoted airline's total outstanding dues stood at Rs 60 crore, from a high of Rs 140 crore, after its bank accounts were frozen.
Upon being asked if KFA was working ahead with foreign airlines, Mallya at UB Group's AGM on Wednesday said: "Yes, we are in talks".
"A full payment of dues is very difficult and the only way by which the money can come in is via a foreign partner's fund infusion, if it goes through," Solanki said.
According to Solanki, Air India also owes huge dues to the department totalling over Rs 250 crore.
"Air India has told us that they are likely to get an equity infusion and they will pay us out of that," he said, adding only a few of the state-run carrier's accounts have been frozen.
KFA, which currently operates only around 50 services a day with just seven aircraft, is hoping to catch the FDI line thrown by government to bail itself out of the fund crunch.
The Vijay Mallya-owned KFA owes over Rs 7,000 crore to 17 banks in the long-term debt besides the income tax obligation apart from accumulated losses of around Rs 8,000 crore.
With inputs from PTI