India's tax authority has asked the International Air Transport Association (IATA) to deposit Jet Airways' collections from its settlement systems directly to the government to recover pending tax dues, in a sign of deepening trouble in the Indian aviation sector.
"The Indian tax authority had served IATA with a garnishment for the amounts owed to the tax authorities by Jet Airways," IATA spokesman Albert Tjoeng said in an email to reporters.
Earlier, Jet said the country's tax authority has not frozen the airline's bank accounts, contrary to media reports, and the company still planned to pay its January tax dues of INR350 million rupees (USD$7.02 million) on Monday.
"The service tax department has been in touch with IATA with regards to having their proceeds remitted when the collections are remitted to Jet Airways," the airline said in a statement.
About 240 airlines, representing about 84 percent of global scheduled airline traffic, are members of IATA.
India's airlines are reeling under a USD$20 billion debt load and are struggling to make profits, hurt by higher fuel prices, competition and low fares. Five out of India's six scheduled carriers are loss making.
Jet's woes follow those of Kingfisher Airlines. Its accounts were frozen last month over outstanding dues. It had to cancel some flights on Monday due to "employee agitation on account of delayed salaries", pushing the debt-laden carrier deeper into trouble.
Kingfisher was suspended from three settlement systems of the International Air Transport Association (IATA) last week, hurting the airline's ability to deal with global airlines and travel agents.