The Indian Airforce has made an objection against more than Rs 100 crore of integrated goods and services tax (IGST) levied on various imported items. The IAF imported these items from various countries and has shown as "parts of aircraft" in its financial books. Financial daily, the Economic Times reported that the issue is expected to be tabled at the ministerial level where IAF and the Directorate of Revenue Intelligence (DRI) would discuss more on the issue.
As per the sources privy of the development, the IAF argued that these items including electrical and mechanical parts, antennas and electronic spares come under customs tariff heading 8803 which calls for nil or 5% IGST. In contrast, the DRI is of the opinion that these imported spares are not "parts of aircraft" and are imported completely separate items. Notably, these goods are exempted of any duties under the harmonized system nomenclature (HSN) code followed by GST while classifying the goods in five slabs: nil, 5%, 12%, 18%, and 28%.
One official said: "The IGST levied on these items is from the period of the inception of GST. The matter is being probed since August last year and, last month, the IAF made a representation before the DRI, Mumbai, contesting the duty citing that these were parts of aircraft and are well within the common HSN code which guides the GST slabs and that these goods attract GST under chapter 8803 that allows nil or 5 % GST."
The issued would be discussed at the ministerial level meeting and IAF would highlight the need of Rs. 100 crore to buy other critical equipment. "Unlike commercial planes where these items are fitted in the aircraft for commercial purposes, IAF aircraft is mainly used for defense purposes and there is a view in the forces that the matter should be taken at the highest level so that IGST on accessories imported by the IAF are exempted,'' the official further added.
The DRI is arguing that it is following the routine process wherein all the other government agencies are also asked to pay IGST on imports. One of the officials said the IAF could pay the proposed duties and then seek a claim from the government. "The IAF has not been singled out, the DRI found duty evasion of over `300 crores by various private airline and aerospace firms," he said.