Such imposition of tax not only goes against the Act, which cites zero VAT for air transport service, but also against international norms, Board of Airlines Representatives Nepal (BARN) said. It has also submitted a memorandum to Ministry of Tourism and Civil Aviation (MoTCA), requesting the government for exempting VAT. [break]
BARN is an organization of 28 different international airlines that operate flights to Nepal. It comes amid complaints by airlines that operating flights from Tribhuvan International Airport (TIA) is more expensive than other international airports. BARN said exemption of VAT would significantly help them lower the cost of operations.
Currently, Nepal Airlines Corporation (NAC) charges for ground handling service on the basis of size of aircraft. For ground handling of mid-size Boeing 757, NAC charges $300 per flight, and lack of compliance with the law has forced airlines operators to pay additional 13 percent to this charge. NAC is earning the income of around Rs 1.50 billion annually through this service. Interestingly, IRD was not levying VAT on air transportation services till 14 months ago.
BARN President Madan Kharel said, "We have asked MoTCA to help us in exempting tax and have requested officials from IRD and Ministry of Finance (MoF) to stop charging the VAT."
He said no where in the world it was legal to charge VAT from foreigners in airside. He argued that the issue was not simply monetary, but could also raise questions on international relations as it was completely against the international practice.
The anomaly is clear as other airlines that don´t take service from NAC for ground handling are not bound to pay any extra charges. Thai Airways and Indian Airlines have separate units for ground handling and is not controlled by NAC.
On the other side NAC which is operating flights to other countries is not bound to pay VAT in any airport
At present, NAC is operating flights to different international sector, it doesn´t have to pay VAT.
Suresh Acharya, joint-secretary at MoTCA said that neither MoU of the airlines nor the exiting act of the country could charge VAT in ground handling services. He said that they had received the complaint from BARN and were holing talks with officials from IRD and MoF to resolve the issue.
Officials at IRD however said they were not familiar on the issue. Director General of IRD Tanka Mani Sharma said that they have not received any complaints so for.
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