Airlines Eligible for GST Refund on Cancelled Tickets if Fare and Tax Are Returned to Passengers, Rules GSTAT:

The GST Appellate Tribunal (GSTAT) has ruled that airlines can claim a refund of GST paid on cancelled tickets if they have returned both the ticket fare and the tax to passengers and have proper documents to prove it.

In the case of Singapore Airlines vs. Commissioner of CGST & CE, Kochi, the Ernakulam Bench of GSTAT found that the airline had provided sufficient evidence to show that passengers received the full refund for their cancelled tickets. The tribunal also found that the tax burden had not been passed on to anyone else.

The tribunal directed the tax department to process Singapore Airlines’ refund claim within two weeks and pay the amount along with interest.

The case involved eight refund claims worth a total of Rs 45,92,528 for the period from October 2019 to March 2021. During the Covid-19 pandemic, Singapore Airlines cancelled several flights and refunded passengers both the ticket fare and GST. However, the airline was unable to adjust the related credit notes against its output tax liability.

The GST Joint Commissioner had earlier rejected the airline’s refund claims, prompting Singapore Airlines to appeal before the tribunal.

In its order dated October 16, GSTAT set aside the earlier decision and ruled that the airline was eligible for a refund of the GST it had paid to the government after collecting it from passengers, since the full amount, including GST, had subsequently been returned due to flight cancellations during the pandemic, in line with the Supreme Court’s order.

An expert, said the ruling was a positive development. He noted that GST should not become an additional cost for businesses when a transaction is cancelled and the tax collected has been fully refunded to customers.