Service Tax department of India has asked the International Air Transport Association (IATA) to deposit Jet Airways' collections from its settlement systems directly to the government to recover pending tax dues, in a sign of deepening trouble in the Indianaviation sector.
"The Indian tax authority had served IATA with a garnishment for the amounts owed to the tax authorities by Jet Airways," IATA spokesman Albert Tjoeng said in an email to Reuters.
Earlier, Jet, the top Indian carrier, said the country's tax authority has not frozen the airline's bank accounts, contrary to media reports, and the company still plans to pay its January tax dues of 350 million rupees ($7.02 million) on Monday.
"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 airline said in a statement. About 240 airlines, representing about 84 percent of global scheduled airline traffic, are members of IATA.
India's airlines are reeling under a $20 billion debt load and are struggling to make profits, hurt by higher fuel prices, competition and low fares. Five out of India's six scheduled carriers are loss-making.
Jet's woes follow those of Kingfisher Airlines. Its accounts were frozen last month over outstanding dues. It had to cancel some flights on Monday due to "employee agitation on account of delayed salaries", pushing the debt-laden carrier deeper into trouble.
Kingfisher was suspended from three settlement systems of the International Air Transport Association (IATA) last week, hurting the airline's ability to deal with global airlines and travel agents.
Jet shares, valued at about $500 million, closed 0.49 percent down at 292.65 rupees on Monday in a firm Mumbai market.
meanwhile, Jet Airways (India) Ltd. will clear its service tax arrears of 350 million rupees on March 15, the airline said Tuesday, a day after Indian authorities sought help from the International Air Transport Association in recovering the arrears.
Jet, India's biggest airline by market share, said in a statement that "a payment schedule has been mutually worked out and accepted together with the tax authorities."
It said that the service tax department has already received 350 million rupees as per the mutually accepted payment schedule and that the carrier will pay an equal amount to the authorities on March 15.
The carrier didn't give any other details of the payment schedule.