GST Refund On Cancelled Air Tickets Gets GSTAT Nod, Airlines Can Claim Tax Back If Passengers Receive Full Refund

New Delhi: Airlines can claim refunds of Goods and Services Tax (GST) paid on cancelled flight tickets if they have returned both the ticket fare and tax to passengers, the Goods and Services Tax Appellate Tribunal (GSTAT) has ruled.

The ruling provides relief to airlines facing difficulties in recovering GST on cancelled bookings, particularly during the COVID-19 pandemic.

Singapore Airlines Wins Refund Case

The Ernakulam bench of GSTAT delivered the ruling in the case of Singapore Airlines Ltd versus the Kochi Commissioner of CGST and Central Excise.

The dispute involved eight GST refund claims totalling Rs 45.92 lakh for the period between October 2019 and March 2021.

During the pandemic, Singapore Airlines cancelled several flights and refunded passengers their ticket fares, including GST.

However, the airline could not adjust the credit notes against its output tax liability and subsequently sought a refund from the tax department.

Tribunal Orders Refund Within Two Weeks

The GST Joint Commissioner had earlier rejected the airline's refund claims, prompting the company to approach the appellate tribunal.

In its October 16 order, GSTAT overturned the earlier decision and directed the department to process the refund within two weeks, along with applicable interest.

The tribunal observed that the airline had submitted sufficient evidence establishing that passengers received their refunds directly.

It also concluded that the airline had not retained the tax amount, satisfying the requirement against unjust enrichment.

Industry Experts Welcome Decision

Rahul Shekhar, Partner, Indirect Tax at Nangia Global, welcomed the ruling, saying GST should not become an additional cost when transactions are cancelled and customers receive complete refunds.

He stressed that tax authorities should examine supporting documents collectively instead of rejecting genuine claims on technical grounds.

Proper Documentation Remains Crucial

AMRG Global Managing Partner Rajat Mohan said the ruling recognised GST refunds as excess tax payments where businesses had already reimbursed customers but could not adjust credit notes.

He highlighted the importance of passenger-level records connecting invoices, credit notes and actual refund transactions.

Experts cautioned that airlines and other businesses must maintain complete documentation, particularly for bookings made through travel agents, to establish refund eligibility.