Debt-ridden carriers Kingfisher Airlines and Air India had some of their bank accounts frozen by the Service Tax Department on Thursday, as these airlines failed to pay service tax to the government, after collecting it from passengers.
?We have frozen 11 accounts of Air India and 10 of Kingfisher Airlines for defaulting on service tax payments over the last five days,? SK Solanki, commissioner of service tax, Zone 1 (Mumbai commissionerate, Central Board of Excise and Customs), said. ?While Air India owes us R150 crore (for April-August), the dues from Kingfisher Airlines is about R70 crore (April-September).?
A Kingfisher Airlines spokesperson did not comment, stating that they do not share details of transactions between the company and the government.
Air India officials said they had cleared some dues by Thursday evening to have their accounts activated. ?We have made a partial payment of our dues, and our accounts have been activated again,? a senior Air India official told FE.
Both airlines had defaulted on their payment of the service tax, even though they collected this from passengers, Solanki said.
He said this is the second time within a month that Kingfisher Airlines? accounts have been frozen. The department had activated the account after assurances from the airline that it will deposit the dues in three installments, he added.
Economy class passengers pay R150 as service tax on domestic routes, and R750 on international routes. Air India has taken a working capital loan of R22,000 crore from as many as 28 lenders and borrowed R21,000 crore for buying new aircraft.
The Vijay Mallya-promoted Kingfisher, which did not report a profit since its start in 2005, made losses of R732 crore in the fiscal half ended September 2011 and is saddled with R7,000-crore debt, which has to be repaid starting 2013.
The airline is struggling to meet its huge financial liabilities. Recently, the GVK-led Mumbai International Airport put the airline on a cash-and-carry basis from December 3 after it failed to clear R90 crore in dues which are pending for the last six months.
State-owned Airports Authority of India (AAI), which operates 125 airports across the country, also planned to put Kingfisher Airlines on ?cash-and-carry? mode on all airports operated by AAI, as the carrier owes it R240 crore.