GST tribunal allows refund on cancelled air tickets

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 fare and the tax to passengers and can provide supporting documents. The Ernakulam bench of GSTAT, in a case involving Singapore Airlines, directed the revenue department to process the refund claim within two weeks and make payment with interest.

The case involves eight refund claims totalling Rs 45.92 lakh by Singapore Airlines for the period between October 2019 and March 2021. During the COVID-19 pandemic, the airline cancelled flights and refunded fares including GST to passengers, but could not adjust the credit notes against output tax. The GST Joint Commissioner had earlier rejected the claims. The tribunal, in its order dated 16 October, said there was sufficient evidence that refunds reached passengers and no tax incidence was passed on.

Tax experts said the ruling is a positive development for the industry but stressed that taxpayers must maintain robust documentation, especially passenger-level records, to satisfy the test of unjust enrichment. Taxpayers unable to build such a trail, particularly for agent-sold tickets, should not assume the same outcome.