Jet Airways errs on taxes, accounts frozen

The Revenue Department Monday attached Jet Airways' accounts, maintained by global airlines' body IATA, for non-payment of service tax dues to the tune of Rs 69 crore.

Updated: Mar 12, 2012, 23:43 PM IST

New Delhi: Jet Airways, which is having problems of cash crunch, was on Monday jolted by a Service Tax department directive to global airlines body IATA to pay the carrier's tax dues of about Rs 69 crore.

The International Air Transport Association (IATA) was sent an advisory by the department to remit the tax dues of Jet to the department before settling the bills of the airline, IATA sources said.

CBEC officials confirmed that the Service Tax Department had sent such a directive.

The department, which had sent a notice last Friday to Jet Airways cautioning the airline that its accounts would be frozen if it fails to to clear the service tax by Monday.

The service tax payment was due since March 6. Jet had then said it would clear the dues by today.

Confirming the action against them, a Jet spokesperson said today "the Service Tax Department has been in touch with IATA with regards to having their proceeds remitted when the collections are remitted to Jet Airways".

The spokesperson said "no bank account of the airline has been frozen or attached."

The IATA maintains accounts to enable airlines transact business with their counterparts, travel and cargo agents and other vendors, both in the domestic and international markets.

The Service Tax Department's action implies that IATA would first deduct the payments due to the Department before settling the Jet account.

The primary IATA platforms, which carry out these activities are its Clearing House, Billing and Settlement Plan (BSP) and Cargo Accounts Settlement System (CASS).

While the IATA Clearing House deals with airlines making payments for services to other carriers or aviation-related companies, the BSP and the CASS programmes facilitate the sale of tickets and booking of cargo through travel and freight agents.

In a statement from Singapore, an IATA official said, "the Indian tax authority had served IATA with a garnishment for the amounts owed to the tax authorities by Jet Airways."

Garnishment is a warning served on a third party to hold money or property belonging to a debtor who is being sued or prosecuted by a creditor.