Plugging revenue loss; finance ministry wants curbs on corporate jets

NEW DELHI: The finance ministry has asked the aviation regulator to plug a loophole that permits companies to avoid paying import duty on corporate jets, depriving the exchequer of revenue worth hundreds of crores.

According to current guidelines, no Customs duty is levied on an aircraft registered overseas if it is brought into India for the purpose of ‘a flight’ and leaves the country’s shores in less than six months.

The ministry feels Indian corporates are misusing this provision by registering their planes overseas through foreign arms, predominantly using them in India, and then flying them to a neighbouring country for a few hours before the sixmonth period.

This allows them to evade payment of import duty, which varies from 6.6% for non-scheduled operators to 18.5% for aircraft meant for personal use. The ministry has written to the Directorate General of Civil Aviation asking it to quantify the number of domestic flights a foreign-registered aircraft can fly in the sixmonth period.

“Once the rules specify the number of flights, the misuse of this provision will stop,” said a finance ministry official. Industry, however, is opposed to a change in rules.

“The change which the finance ministry is seeking will create problems,” said Rohit Kapoor, president, Business Aircraft Operator’s Association.