The GST Appellate Tribunal has determined that airlines are entitled to claim refunds of Goods and Services Tax (GST) paid on cancelled flight tickets, provided they have refunded both the fare and the tax to passengers and can support their claims with appropriate documentation. This decision arose from a case involving Singapore Airlines Ltd and the Kochi Commissioner of CGST & CE, with the Ernakulam bench of the GST Appellate Tribunal (GSTAT) finding adequate evidence that the refunds were directly received by passengers and that the airline did not transfer the tax burden to them.

Details of the Refund Claims

The tribunal’s ruling pertains to eight GST refund claims amounting to Rs 45.92 lakh for the period from October 2019 to March 2021. During the Covid-19 pandemic, Singapore Airlines cancelled numerous flights and refunded fares to passengers, including the GST portion. However, the airline faced challenges in adjusting the corresponding credit notes against its output tax liability, leading to the rejection of its refund claims by the GST Joint Commissioner. Consequently, Singapore Airlines sought recourse through the tribunal.

On October 16, the GSTAT overturned the previous decision, affirming that Singapore Airlines was indeed eligible for a refund of the GST collected from passengers and subsequently paid to the tax department. The tribunal noted that the airline had returned the full fare, including GST, in compliance with a Supreme Court directive regarding cancellations due to the pandemic. The tribunal stated, “The appellant airline is eligible for the refund of GST collected from the passengers and paid by them to the GST department, but subsequently refunded the entire amount of fare, including GST, to the passengers.”

Furthermore, the tribunal concluded that sufficient evidence was presented to confirm that refunds for cancelled tickets were directly received by the respective passengers, without any tax burden being passed on. This aspect is crucial, as it relates to the principle of unjust enrichment, which can influence a taxpayer’s eligibility for refunds.

Significance of Documentation for Tax Refunds

Experts have highlighted the importance of maintaining comprehensive documentation to support refund claims. Rahul Shekhar, a partner for indirect tax at Nangia Global, described the tribunal’s ruling as a favourable outcome for the industry, emphasising that GST should not become an additional cost when a transaction is cancelled and the tax collected has been fully returned to customers. Shekhar noted the necessity for tax authorities to evaluate supporting documents holistically rather than dismiss genuine refund claims based on technicalities.

Furthermore, he underscored that taxpayers must ensure they have robust documentation to satisfy the criteria of unjust enrichment. Rajat Mohan, managing partner at AMRG Global, explained that the tribunal allowed the refund as an excess tax payment in a situation where the business had refunded customers but had no remaining outward tax liability to offset the credit notes, resulting in the tax remaining with the government.

Mohan remarked that the case hinged on the evidence provided, including passenger-level records that linked invoices, credit notes, and refunds, demonstrating that no tax was retained. He cautioned that taxpayers who are unable to establish a similar trail, particularly for tickets sold through agents, should not assume they will achieve the same outcome. This ruling serves as a reminder of the critical need for meticulous record-keeping when pursuing GST refunds for cancelled transactions.

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