Indian Corporate Jets Face Tax Evasion Probe

 - February 4, 2012, 6:00 AM
Ventura Airconnect is flying three Cessna Caravans on twice-daily trips between cities in Madhya Pradesh.

India’s Directorate of Revenue Intelligence (DRI) is scrutinizing approximately 15 Indian companies that it believes are basing their foreign-registered corporate aircraft overseas to evade customs duty and taxes. In particular, the agency has confirmed it is looking at the status of a Boeing 727 owned by the UB Group, Punj Lloyd’s Gulfstream, Essar’s Boeing 737 and Bharat Hotels’ Embraer Legacy 600. Several other corporate jets are also understood to be under investigation.

“While genuine offenders need to be punished, India needs to ensure that it does not violate the spirit of the Article 24 of the Chicago Convention, which states that aircraft on a flight to, from and across the territory of another contracting state ‘shall be admitted temporarily free of duty, subject to customs regulations of the State.’ Otherwise, there is concern that other countries might reciprocate with similar restrictions,” said Rohit Kapur, president of India’s Business Aircraft Operators Association.

The heavy hand of this murky law revealed itself when the DRI seized a U.S.-registered Gulfstream belonging to India’s Punj Lloyd Group’s Singapore subsidiary on January 3 at Goa’s Dabolim Airport while flying a senior executive to Doha. The aircraft was released with a heavy bank guarantee, and a DRI official told AIN, “The spirit of the law has been violated, not the law itself.”

India levies no customs duty on foreign-registered aircraft if they fly out within 15 days of arrival in the country. Many Indian companies with subsidiaries in foreign countries having the same chairmen retain U.S. registration because India has complex bureaucratic processes. For example, India’s Director General of Civil Aviation (DGCA) does not allow cross-utilization of pilots from one aircraft to another, and should a pilot fall sick it is easier to replace him if the aircraft is registered overseas. Obtaining DGCA clearance for embarking on heavy maintenance and pilot training can also prove to be impediments. Also, Indian private and corporate owners generally believe that foreign-owned aircraft retain a higher resale value.