Short Term Hiring of Aircraft brought under Service Tax Net - Blow for Airlines in India
THE already burdened and loss making aviation sector was given another shock treatment by the finance Minister in this Budget, by an innocuous amendment to Place of Provision of Services Rules, 2012.
When an Indian airlines company hires a foreign aircraft upto a period of one month, there was no liability to pay Service Tax as the Place of Provision of Service would be the location of the service provider as per Rule 9(d) of the Place of Provision of Services Rules, 2012. Now this is amended to exclude aircrafts and vessels from the purview of Rule 9(d). Now aircrafts will fall into Rule 3 where the Place of Provision of Service is the location of the recipient - India irrespective of the period of hiring.
The TRU letter explains:
Service consisting of hiring of Vessels (excluding yachts) and Aircraft is being excluded from rule 9(d). Accordingly, hiring of vessels, or aircraft, irrespective of whether short term or long term, will be covered by the general rule, that is, the place of location of the service receiver .