CBIC Clarifies GST Exemption for Foreign Airlines on Import of Services Under Bilateral Air Agreements

The Central Board of Indirect Taxes and Customs (CBIC), through a communication dated 31st January 2025, has shared important clarifications relating to Gazette Notification No. 08/2024 – Integrated Tax (Rate), dated 8th October 2024. The notification addresses the exemption from IGST on import of services by foreign airline establishments in India from their related parties abroad, when such services are availed without consideration, subject to specific reciprocal conditions.

Background

Following the 54th GST Council meeting held on 9th September 2024, the government granted conditional IGST exemption on import of services by foreign airline branches or liaison offices operating in India from their parent companies or other overseas establishments.

This move seeks to ensure tax neutrality, particularly in alignment with bilateral air service agreements between India and other nations.

Key Conditions for IGST Exemption:

Tax Paid on Core Services:
The foreign airline’s Indian establishment must pay GST at applicable rates on transportation of goods and passengers in India.
Designation Under Bilateral Agreement:
The Ministry of Civil Aviation (MoCA) must certify that the foreign airline is officially designated under a bilateral air services agreement with India.
Reciprocity Clause:
MoCA must further certify that Indian airlines are not subject to similar taxes for availing such services abroad in the corresponding foreign jurisdiction.

MoCA’s Role and Inputs

Annexure I: MoCA has provided a list of designated foreign airlines currently operating under the Winter 2024–25 schedule.
Annexure II: MoCA also shared feedback from Indian carriers—Air India, IndiGo, and Akasa Air—regarding reciprocal treatment in foreign jurisdictions, forming the basis for determining compliance with the reciprocity clause.

These annexures have been published on the CBIC website for reference by GST field formations and relevant stakeholders.

Implications for Foreign Airlines

Establishments of designated foreign airlines in India can claim exemption from IGST on certain intra-group cross-border services (like global reservation systems or administrative support) received without consideration—only if all conditions are satisfied.
The certifications from MoCA are crucial documentation for availing such exemptions.

Compliance Advisory

Tax professionals and airline tax managers must maintain documentary evidence of MoCA certification and verify the list of designated airlines and reciprocity details before availing the exemption.
Field officers should review these certifications as part of routine GST audits or investigations into international aviation operators.

Conclusion

This GST relief measure for foreign airline entities reinforces India’s commitment to international aviation cooperation and reciprocal taxation norms. At the same time, it establishes a transparent framework for claiming exemptions, ensuring that Indian airlines receive fair treatment abroad.

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Source: CBIC

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