Kerala AAR Rules GST Applicable on AAI-Adani Concession Agreement for Thiruvananthapuram Airport

The Kerala bench of the GST Authority for Advance Ruling (AAR) recently ruled that the concession agreement between the Airports Authority of India (AAI) and Adani Thiruvananthapuram International Airport Ltd is not a “transfer of business.” The ruling, however, deems the agreement a “supply of services” and thus attracts GST. This is a distinction from prior decisions of other AARs and AAARs in Rajasthan, Gujarat, and Uttar Pradesh, which exempted agreements of a similar kind from GST under the “transfer as going concern.”

The AAI had entered into a 50-year concessionaire agreement with Adani Thiruvananthapuram International Airport Ltd for the operation, management, and development of Thiruvananthapuram Airport. To seek clarification on the GST implications, AAI approached the AAR to determine whether this agreement was a “transfer of business” and if it could be treated as a “going concern” transfer, which would attract GST exemption.

The AAR concluded that this transaction does not qualify as a “transfer of business” and, therefore, cannot be classified as a “transfer as going concern.” The AAR held that this arrangement involves the concessionaire providing services for the development of the airport while AAI provides manpower, leases, and other support. Section 7 of the GST Act defines these activities as “supply,” making them subject to GST.

The AAR further clarified that GST would be applicable to the amounts received for leasing or supplying existing aeronautical and non-aeronautical assets, along with capital work in progress. Since AAI has not transferred these assets to the concessionaire, GST will be levied on the consideration for their lease or supply. The order further states that GST will apply to the annual concession fees payable by the concessionaire, as well as invoices raised by AAI for reimbursement of salary and staff costs of the concessionaire, with an 18 percent GST rate.

This ruling contrasts with the views previously held by the Rajasthan and Gujarat AAARs, which concluded that transfers of airports, such as Jaipur and Ahmedabad, to private concessionaires qualify as “going concern” transfers and are therefore exempt from GST. A similar view was also taken by the Uttar Pradesh AAR in ruling that the transfer of Chaudhary Charan Singh International Airport in Lucknow to Adani Lucknow International Airport Ltd qualified as a “going concern” and thus falls under the GST exemption.

The variance among states in interpreting GST law demonstrates the challenges in ensuring uniform tax treatment of similar transactions. Businesses involved in these agreements may face inconsistent tax obligations, emphasizing the need for clearer national-level guidelines to ensure consistency in GST application across states.