Goods and Services Tax (GST) is a value-added tax levied on the goods and services sold in the Indian market. Since its implementation in 2017, GST has been in the limelight for its various exemptions and policies. One such exemption is on the disbursement of Viability Gap Funding (VGF) to Selected Airline Operators.
Under the VGF scheme, the government provides financial support to certain sectors such as aviation, infrastructure, and social development where private investments are not forthcoming. The VGF scheme was introduced to encourage private participation and investment in such sectors. Selected Airline Operators are eligible for VGF to develop regional connectivity by operating flights to unserved and underserved airports in India.
The government had exempted GST on the disbursement of VGF to Selected Airline Operators. This exemption was implemented to reduce the financial burden on the airlines and make the VGF scheme more attractive. The exemption of GST on VGF has been a relief for the airline operators as they are already facing financial strains due to high operating costs and low passenger loads.
The GST exemption on VGF disbursement has been a boost for the Aviation sector in India. The VGF scheme has played a significant role in the development of regional connectivity in India. The exemption has led to increased investments and participation from the private sector, which has led to a boost in the overall development of the sector.
The GST exemption on VGF disbursement was implemented in 2017 through Notification No. 12/2017 – Central Tax (Rate). The notification specified that the exemption would be applicable on the VGF component of the viability gap funding scheme funded by the Ministry of Civil Aviation.
However, there have been some concerns regarding the GST exemption on VGF disbursement. Some experts believe that the exemption is discriminatory as it is only applicable to the aviation sector. They argue that other sectors that receive VGF support, such as infrastructure and social development, should also be exempted from GST on VGF disbursement.
Another concern is that the GST exemption on VGF disbursement is only applicable to Selected Airline Operators. The exemption is not applicable to all airlines operating in India. This has led to issues of unfair competition as airlines that are not eligible for the exemption have to pay GST on VGF disbursement, which puts them at a disadvantage.
Despite these concerns, the GST exemption on VGF disbursement has been a significant relief for the Aviation sector in India. The government has also taken various initiatives to promote the growth of the sector, such as the UDAN scheme, which aims to connect unserved and underserved airports in India.
The GST exemption on VGF disbursement has been a step in the right direction, and the government should continue to take measures to promote the growth of the Aviation sector in India.
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