GSTAT Rules Singapore Airlines Eligible for GST Refund on Cancelled Pandemic Flights

The GST Appellate Tribunal (GSTAT) has ruled that Goods and Services Tax (GST) paid on cancelled airline tickets can be claimed as a refund, provided the airline has returned both the fare and the GST to the passengers and maintains supporting documentation to prove it.

The Ernakulam bench of the GSTAT delivered the ruling in the case of Singapore Airlines Ltd. versus the Kochi Commissioner of CGST & CE, Kochi. The tribunal concluded that there is sufficient evidence confirming the refund for cancelled tickets reached the respective passengers directly, ensuring there was no passing of the incidence of tax.

Consequently, the GSTAT directed the revenue department to process the airline's refund claim within two weeks, along with applicable interest. The case involves eight GST refund claims totalling ₹45,92,528 submitted by Singapore Airlines for the period between October 2019 and March 2021.

During this timeframe, the COVID-19 pandemic forced the airline to cancel flights and return fares and GST to passengers. However, the carrier was unable to adjust the credit notes against output tax. The GST Joint Commissioner had initially rejected the refund claims, which led the appellant to approach the GSTAT.

In its order dated October 16, setting aside the earlier order, the GSTAT stated that the appellant airline is eligible for the refund of GST collected from passengers and paid to the GST department. The tribunal noted that the airline subsequently refunded the entire fare amount, including GST, to passengers due to pandemic-related flight cancellations in terms of the Supreme Court's order.

Industry experts have weighed in on the implications of the decision. Rahul Shekhar, Partner for Indirect Tax at Nangia Global, described the ruling as a positive development for the industry. He stated that GST should not become a cost when a transaction is cancelled and the tax collected is fully refunded to customers. Shekhar added that the ruling highlights the need for field formations to consider all supporting documents collectively rather than rejecting genuine refund claims on technical grounds, while emphasizing that taxpayers must maintain robust documentation to satisfy the test of unjust enrichment.

Rajat Mohan, Managing Partner at AMRG Global, noted that the Tribunal allowed the refund as an 'excess payment of tax' in a scenario where a business repaid customers but had no outward liability left to absorb the credit note, leaving the tax with the government. Mohan explained that evidence decided the case, as passenger-level records linking invoices, credit notes, refunds, and settlement data showed no tax was retained. He cautioned that taxpayers unable to build that trail, particularly for agent-sold tickets, should not assume the same outcome.

"This GSTAT ruling provides vital clarity for businesses dealing with customer refunds during unforeseen disruptions like the pandemic. It underscores the critical importance of maintaining meticulous, passenger-level documentation. Companies must ensure their compliance trails—from invoices to settlement data—are completely transparent to successfully claim tax refunds and avoid unnecessary technical rejections." — Dr. Shishir Gupta, Founder & CEO, StartupLanes