GST to be Refunded on Cancelled Flights; Tribunal Grants Relief to Airlines

The Goods and Services Tax Appellate Tribunal (GSTAT) has ruled that airlines may claim a refund of GST after returning the ticket fare and the associated GST to passengers, provided that the payment can be substantiated with the necessary documentation.

If you have booked a flight ticket and the flight is subsequently cancelled, the refund of both the ticket fare and the GST paid on it becomes significant. In this regard, the Goods and Services Tax Appellate Tribunal (GSTAT) has provided relief to airlines. The tribunal stated that if an airline refunds the fare of a cancelled ticket—along with the GST charged on it—to the passengers, it is entitled to claim a refund of the GST that was originally deposited.

However, the airline must prove, through the submission of required documents, that the tax amount has indeed been returned to the passengers. This ruling emerged from a case involving Singapore Airlines and the Commissioner of CGST and Central Excise, Kochi. In approving the airline's refund claim, the tribunal directed the relevant department to process the claim within two weeks and issue the payment along with applicable interest.

How much GST refund did Singapore Airlines seek?

This matter pertains to eight GST refund claims filed by Singapore Airlines between October 2019 and March 2021, amounting to a total of ₹45,92,528. During the COVID-19 pandemic, following the cancellation of numerous flights, the airline had refunded both the ticket fares and the GST to the affected passengers.

However, as the airline was unable to adjust these amounts against its output tax liability through credit notes, it proceeded to file a claim for a refund. Initially, the Joint Commissioner of GST had rejected these refund claims. Following this, the airline approached the tribunal. The Ernakulam bench of the GSTAT set aside the earlier order and directed the department to process the refund claim within two weeks and make the payment, along with applicable interest.

Will every airline receive a GST refund?

This ruling does not imply that an airline will automatically receive a GST refund for every cancelled flight. To claim a refund, the company must prove that it has reimbursed the passengers for both the fare and the tax amount. Particularly in cases involving tickets sold through agents, it may be necessary to maintain records pertaining to the tickets, credit notes, refunds issued to individual passengers, and the actual payments made.