Dry leasing of aircraft: PIA wants to pay GST in instalments

ISLAMABAD: Pakistan International Airlines (PIA) has decided to induct four A320 aircraft on dry lease basis for the period of 72 months but is unable to pay 17 per cent General Sales Tax due to feeble financial position, well informed sources told Business Recorder.

The lease rental value of four aircraft is Rs. 9.388 billion approximately. As per agreement between PIACL- CGACS first aircraft arrived at New Islamabad International Airport (IIAP) on April 29, 2022 and the other three aircraft are scheduled to arrive in Pakistan in the coming weeks.

Currently, PIACL is facing financial constraints and is not in a position to pay GST @17 per cent on the total rental value of Rs. 9.388 billion, i.e., Rs 1.596 billion in lump sum. In this regard, PIACL directly approached FBR on May 9, 2022, May 21, 2022 and May 27, 2022 for payment of GST @ 17% in monthly instalments. However, FBR responded after a lapse of a month and that too after vigorous follow up.

Simultaneously, PIACL approached Ministry of Aviation to take up the matter with FBR which requested FBR for immediate release of the aircraft already arrived at IIAP on upfront payment of GST in two instalments.

FBR while responding to PIACL has informed that there is no provision in Sales Tax Act, 1990 to allow payment of due sales tax on instalment basis. FBR; therefore, advised PIACL to approach ECC for similar action.

Aviation Division argues that in the past, in similar circumstances, ECC had approved payment of GST in instalments. Aviation Division has also endorsed PIACL’s request for payment of GST @ 17 per cent rental value of the leased aircrafts in monthly instalments as advised by FBR.

Aviation Division has proposed that ECC may approve payment of GST @ 17%, i.e., Rs. 1.596 billion approximately on total rental value of Rs.9.388 billion of four A320 leased aircrafts in monthly instalments over the lease term of six years starting from the date of arrival, including the aircraft that has already arrived.

Copyright Business Recorder, 2022