Leasing Aircraft Services Attracts 5% Tax Rate: Gujarat AAR

The applicant is a Special Economic Zone (SEZ) unit engaged in the business of leasing helicopters/aircraft/aeroplanes for which it signs a dry contract with the lessee. The lessee is required to pay the rent as per the agreement. As per the applicant, the word dry lease means that the lessor provides only the aircraft to the lessee, without providing any crew, maintenance, or insurance. The lessee is responsible for all aspects of the aircraft.

The applicant filed an applicantion before the Gujarat Authority for Advance Ruling (GAAR) to get an advance ruling on the following questions:

“(1)Whether renting of aircraft without operator can be classified under HSN code 9973-Leasing or rental services without operator-Sl. No. 17(iii) of Notification No. 11/2017-CT(R) dtd. 28.06.2017, as amended?

(2) If the answer to question 1 is No, whether renting of aircraft without operator can be classified under HSN code 9973- Leasing or rental services without operator-Sl. No. 17(viia) of Notification No. 11/2017-CT(R) dtd. 28.06.2017, as amended?

(3) What will be the GST rate applicable on the leasing of helicopter/aircraft services provided by the company?”

The Gujarat AAR observed the dry lease agreement signed between the applicant and the lessee, M/s Thumby Aviation Pvt Ltd. It concluded that, as per Clause C of the agreement, M/s Thumby is a Non-Scheduled Air Transport Operator and the helicopter is used for commercial purposes. Based on the notification No. 1/2017-CT(R) dated. 28.06.2017 the GST rate should be 5%, unless it is used for personal use.

It further ruled that the HSN code for renting the aircraft without operator would be 9973-leasing or rental services without operator, and the IGST rate on the leasing of a helicopter or aircraft service would be 5% as the applicant is an SEZ unit.