GST Refund Allowed on Cancelled Air Tickets

The GST Appellate Tribunal (GSTAT) has ruled that GST refund is allowed on cancelled air tickets if the fare and taxes are returned to passengers. This decision comes after the tribunal heard the case of Singapore Airlines Ltd. vs Kochi Commissioner of CGST & CE, in which the airline had claimed a refund of ₹45,92,528 for the period between October 2019 and March 2021.

The case relates to eight GST refund claims made by Singapore Airlines, which had to cancel flights due to the Covid-19 pandemic and returned fares and GST to passengers. However, the airline was unable to adjust the credit notes against output tax, leading to the refund claims.

The GST Joint Commissioner had earlier rejected the refund claims, but the GSTAT has now directed the revenue department to process the refund claim of the airline within two weeks and make payment along with interest. The tribunal's order, dated October 16, stated that the appellant airline is eligible for the refund of GST collected from the passengers and paid by them to the GST department, but subsequently refunded the entire amount of fare, including GST, to the passengers.

Rahul Shekhar, Partner- Indirect Tax at Nangia Global, has welcomed the ruling, saying it is a positive development for the industry. AMRG Global Managing Partner Rajat Mohan also noted that the Tribunal had allowed a refund as 'excess payment of tax' in a case where a business has repaid customers but has no outward liability left to absorb the credit note, and the tax.

## Why it matters The GSTAT's ruling could have significant implications for airlines that had to cancel flights due to the Covid-19 pandemic. With many airlines having to return fares and GST to passengers, this decision could provide a much-needed relief to the industry. The ruling also highlights the importance of providing sufficient evidence to ensure that the refund of cancelled tickets has reached the respective passengers directly and that there is no passing of the incidence of tax.

The GSTAT's decision is expected to benefit not just Singapore Airlines but also other airlines that have had to cancel flights due to the pandemic. As the industry continues to recover from the impact of the pandemic, this ruling could provide a welcome boost to airlines that have been struggling to stay afloat.