Kingfisher, AI accounts frozen over Rs 220cr service tax dues

KingfisherNEW DELHI: Mumbai’s service tax department froze several accounts of cash-strapped Air India and Kingfisher on Thursday, as both airlines owed it crores of rupees which was collected from passengers but not paid to the exchequer. This is the second time in less than a month that Kingfisher has had its accounts blocked for non-payment of service tax dues.

AI owes the department Rs 150 crore, while Kingfisher has to pay up Rs 70 crore.”We have frozen 11 accounts of AI and 10 of Kingfisher for defaulting on service tax payments over the past five days,” agency reports quoted S K Solanki, commissioner of service tax (zone 1, Mumbai commissionerate ) of the Central Board of Excise and Customs, as saying. Solanki said the two airlines have defaulted on payment though they had collected service tax from their customers.

The action was taken after the airlines failed to clear the dues in “sufficient time” given to them. While Kingfisher had to pay for April-September period , AI has to cough up dues for April-August . Solanki pointed out that Kingfisher’s accounts were frozen for two days in November too and the order was reversed only after the airline promised to deposit the dues in three instalments.

S K Solanki, commissioner of service tax (zone 1, Mumbai commissionerate) of the Central Board of Excise and Customs pointed out that Kingfisher’s accounts were frozen for two days in November too and the order was reversed after the airline promised to deposit the dues in three instalments.

“AI’s financial condition is well known. AI has to pay dues to a number of agencies and even our employees,” said a senior AI official. “We are making a part payment to service tax and hope that the accounts will be unblocked soon.” Kingfisher’s spokesperson declined comment on the latest setback. Apart from service tax, Kingfisher is also accused of deducting tax at source from payments made to vendors and employees but not depositing it with the government. Airports Authority of India and Kingfisher pilots have brought up the issue with the airline after queries from the income tax department.

Both AI and Kingfisher owe hundreds of crores to airport operators as well, but being a PSU, the aviation ministry – which controls airports – has not allowed airport operators to put AI on cash-and-carry. Kingfisher, however, now pays on a daily basis in Mumbai and Delhi to operate the severely truncated schedule of flights this winter. A senior aviation ministry official said: “The DGCA is doing a financial audit of airlines to check if the cash crunch is affecting safety, with airlines not being able to spend the required amount on maintenance or spares of aircraft needed for safe operations. ” – TOI