Cancelled flight tickets: Airlines can claim GST refunds if fare and tax are returned

The GST Appellate Tribunal has ruled that airlines can claim refunds of Goods and Services Tax (GST) paid on cancelled flight tickets if they have returned both the fare and the tax to passengers and can substantiate the refunds with supporting documents.In the case of Singapore Airlines Ltd versus Kochi Commissioner of CGST & CE, Kochi, the Ernakulam bench of the GST Appellate Tribunal (GSTAT) found that there was sufficient evidence to establish that the refunds had reached the passengers directly and that the airline had not passed on the incidence of tax.The tribunal directed the revenue department to process Singapore Airlines' refund claim within two weeks and pay the amount along with interest.The ruling concerns eight GST refund claims totalling Rs 45.92 lakh for the period from October 2019 to March 2021.During the Covid-19 pandemic, Singapore Airlines cancelled flights and refunded passengers the fares, including GST.

However, the airline was unable to adjust the corresponding credit notes against its output tax liability.The GST Joint Commissioner had rejected the refund claims, prompting the airline to approach the tribunal. In its order dated October 16, the GSTAT set aside the earlier decision.Tribunal cites evidence of refunds to passengersThe tribunal held that Singapore Airlines was eligible for a refund of the GST collected from passengers and paid to the tax department, as the airline had subsequently returned the entire fare, including GST, following flight cancellations during the pandemic in accordance with a Supreme Court order.“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, on account of cancellation of the flights due to the Covid-19 pandemic in terms of Hon'ble Supreme Court's order,” the tribunal said.It also concluded that the airline had furnished sufficient evidence to establish that refunds for cancelled tickets had reached the respective passengers directly, with no passing on of the tax incidence.The question of whether a business has passed on the tax burden to another party is relevant to the principle of unjust enrichment, which can affect eligibility for a tax refund.Experts stress importance of documentationRahul Shekhar, partner for indirect tax at Nangia Global, described the ruling as a positive development for the industry, arguing that GST should not become a cost when a transaction is cancelled and the tax collected has been fully returned to customers.As quoted by news agency PTI, he said the decision highlighted the need for tax authorities to assess supporting documents collectively instead of rejecting genuine refund claims on technical grounds.However, Shekhar stressed that taxpayers must maintain robust documentation to satisfy the test of unjust enrichment.AMRG global managing partner Rajat Mohan said the tribunal had allowed the refund as an excess payment of tax in a case where the business had repaid customers but had no remaining outward tax liability against which to adjust the credit notes, leaving the tax with the government.“What decided the case was evidence.

Passenger-level records linking invoice, credit note and refund, with settlement data, showed no tax was retained, so there was no unjust enrichment. Taxpayers unable to build that trail, especially for agent-sold tickets, should not assume the same outcome,” Mohan said.The ruling underscores the importance of maintaining passenger-level records and documentation linking invoices, credit notes and refunds when seeking GST refunds for cancelled transactions.You use AI every day.

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