Kingfisher owes Rs60 crore in service tax outstandings: Dept

Kingfisher Airlines continues to default on its service tax outstandings, amounting of over Rs60 crore, and the government move to allow FDI policy in civil aviation sector offers the "only ray of hope" to recover the dues from the debt-ridden airline, according to a top tax official.

Kingfisher has said it is in talks with foreign carriers for bringing in FDI, a move that is expected help it overcome financial troubles.

"Kingfisher Airlines continues to be a defaulter and has an outstanding of over Rs60 crore. It is defaulting on the weekly payments and most of its bank accounts are frozen," Mumbai Service Tax Commissioner Sushil Solanki told PTI.

As the department has frozen almost all the accounts of the ailing airline, which is forced to operate only a skeletal schedule due to drop in services, it is very difficult for the carrier to pay its dues as cash flows are down to a trickle.

Kingfisher has not been depositing service tax collected from passengers with the department since November last on a regular basis and instead has been diverting it for other purposes on a regular basis.

As the airline started defaulting on tax payment, the department started freezing its bank accounts since November last.

The Vijay Mallya-promoted airline's total outstanding dues stood at Rs60 crore, from a high of Rs140 crore, after its bank accounts were frozen.

"A full payment of dues is very difficult and the only way by which the money can come in is via a foreign partner's fund infusion, if it goes through," Solanki said.

Mallya said in Bangalore yesterday that Kingfisher was talking with foreign airlines.

"Yes, we are in talks" he told reporters on the sidelines of the annual general meeting of the UB Group promoted by him.

According to Solanki, the national carrier Air India also owes huge dues to the department totalling over Rs250 crore.

"Air India has told us that they are likely to get an equity infusion and they will pay us out of that," he said, adding only a few of the state-run carrier's accounts have been frozen.

In a strategic move, the government recently allowed up to 49% direct equity holding by foreign carriers in domestic airlines.

Kingfisher, which currently operates only around 50 services a day with just seven aircraft, is hoping to catch the FDI line thrown by government to bail itself out of the fund crunch.

Kingfisher owes over Rs7,000 crore to 17 banks in the long-term debt besides the income tax obligation apart from accumulated losses of around Rs8,000 crore.