Budget 2012: Government slaps new rule for foreign registered aircraft in India.

NEW DELHI: The government has tightened the rules for use of foreign registered aircraft in India after it noticed that companies were using loopholes in the law to avoid paying taxes in India.

Under the new rules announced in the budget, a foreign registered aircraft used in India for more than two months at a stretch has to be registered locally after paying appropriate taxes. The earlier time limit was six months.

"No Customs duty is levied on the aircraft not registered in India, which is brought into India for purpose of 'a' flight to or across India, which is not intended to be registered in India and is intended to be removed from India within six months from the date of entrya¦," the rule said.

Companies were abusing this rule by using a foreign registered aircraft for 180 days at a stretch and then sending it out of India for a few days. This saved them taxes worth hundreds of crores. The aircraft was brought back after a few days for local use for another 180 days.

Some of the biggest corporate names in the country have bought aircraft outside the country via their overseas entities, registered it overseas but have extensively used it in the country.

The finance ministry had shot off a letter to the DGCA pressing for a change in the norms that govern use of foreign registered aircraft in India. The authorities were also worried about the security implications of these aircraft.

The government cannot completely ban use of foreign registered aircraft because of international rules and rising use of chartered flights.

The civil aviation regulator had also highlighted the abuse in a letter with a detailed list of such aircraft to the finance ministry and suggested making security clearance mandatory for pilots of any foreign registered aircraft.

Source : economictimes.indiatimes.com