Odisha to form panel to settle tax dues on HAL

A payment of Rs 603.23 crore in tax dues has been pending since 2005 due to lack of clarity whether the aerospace companyshould be taxed as per commercial norms or not

The state finance department has decided to form a committee for settlement of Rs 603.23 crore tax dues of Hindustan Aeronautics Limited (HAL) pending since 2005 due to a lack of clarity whether the aerospace company should be taxed as per commercial tax norms or not.

HAL has been delaying payments citing its association with Indian Air Force, contrary to the view of Odisha government, which treats the company as a commercial establishment.

The company is mostly engaged in manufacturing and assembling of aero engines of fighter aircraft including the MIG series of planes which are meant solely for the Indian Air Force (IAF).

“Therefore it is requested to settle the issue of payment of sales tax / VAT / CST / OET due on HAL, through a committee constituting members from Government of India, HAL and Government Of Odisha as being done in Karnataka,” financial director of HAL was quoted as saying in the minute details of a meeting with state finance department officials recently.

Based in Bangalore, HAL is one of Asia’s largest aerospace companies. Under the management of the Indian Ministry of Defence, it is involved in aerospace industry which includes manufacturing and assembling aircraft, navigation and related communication equipment, as well as operating airports.

It has several facilities spread across places like Nashik, Korwa, Kanpur, Koraput, Lucknow, Bangalore and Hyderabad. Apart from providing engines for aircraft of the Indian Air Force, the company has commercial transactions with several countries and companies.

The state finance department is firm on its stand that HAL is a commercial establishment.  “Additional Chief Secretary (Finance), stated that HAL being a commercial entity is liable to pay tax,” the minute paper said.

However, since a consensus could not be reached about whether to tax the company as per commercial tax laws or not, the government agreed to form a panel.

“A committee may be constituted for settlement of the tax dues of HAL under VAT ST/Entry Tax pending at different forum. The commercial tax commissioner of Odisha and HAL will reconcile the arrear of sales tax dues and place before the committee for settlement,” said the meeting minutes.

Data from the ministry showed that HAL has been asked to pay Rs 442.59 crore as central sales tax, Rs 6.59 crore as VAT, Rs 169.91 crore as entry tax for the period between 2005 and 2007. The Sales Tax Tribunal of the state has already rejected the plea of HAL to reconsider the tax dues. A second appeal filed by the company is currently under trial.