The Goods and Services Tax Appellate Tribunal (GSTAT), Ernakulam Bench, has allowed Singapore Airlines’ claims for a GST refund of ₹45.92 lakh relating to cancelled flight tickets, holding that the airline had produced sufficient evidence to establish that passengers received the entire fare, including GST.

The Bench of Subramanya Rayaprol (Vice-President) and Ramamoorthi Sriram (Technical Member) set aside the order rejecting eight refund claims and directed the department to process the claims within two weeks of its order and pay the refund with applicable interest from the dates of the original refund applications until actual payment. 

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The dispute concerned whether an airline could recover GST already deposited with the government when it subsequently refunded the entire ticket price, including tax, to passengers following flight cancellations during the COVID-19 pandemic.

The Tribunal also examined whether refund vouchers, tax invoices, credit notes and settlement records established that the tax component had reached the passengers, and whether a refund could be claimed under the category of “excess payment of tax” when credit notes could not be adjusted against output tax liability.

The appellant/assessee had collected and deposited GST on the sale of air tickets. However, widespread cancellations and travel restrictions resulted in passenger refunds exceeding fresh ticket sales.

The airline explained that GSTR-3B did not permit reporting negative amounts during the relevant period. Consequently, credit notes issued against cancelled tickets could not be fully adjusted against its reduced or absent output tax liability.

It filed eight refund applications in November and December 2021 for tax periods covering October 2019 to March 2020, January 2021 and March 2021. The aggregate claim was ₹45,92,528.

The airline relied on CBIC Circular No. 137/07/2020-GST dated April 13, 2020, which permits a refund application in Form GST RFD-01 under “excess payment of tax, if any” where no output liability is available for adjusting a credit note.

The original authority rejected the claims on January 5, 2022, citing the absence of supporting documents establishing excess payment of GST. The Joint Commissioner (Appeals), Kochi, subsequently upheld the rejection.

Before the Tribunal, the department argued that issuing credit notes or producing cancellation records did not establish that the tax component had actually been returned to the ultimate passengers.

It contended that the airline’s Billing and Settlement Plan records showed settlements with travel agents but did not conclusively prove onward refunds to customers. According to the department, the airline needed to establish a direct connection between each cancelled ticket, passenger, credit note and actual refund.

The department also relied on the first appellate authority’s findings concerning the time limit under Section 34(2) and the alleged inability to establish a one-to-one correlation between agents and passengers.

Rejecting the department’s principal evidentiary objection, the Tribunal examined the airline’s refund vouchers, tax invoices and credit notes.

It found that the ticket number and passenger’s name connected the documents, providing a verifiable link between the original booking and the refund. The refund vouchers also reflected the original payment mode, including credit card details.

The Bench observed that the documents had already been submitted to both the adjudicating authority and the first appellate authority. It criticised their failure to examine the readily identifiable connection between the records before rejecting the claims.

The Tribunal further accepted the role of the International Air Transport Association’s Billing and Settlement Plan in settling ticket sales and refunds between airlines and accredited travel agents. On the evidence before it, the Bench found that the refunds had reached the respective passengers through the applicable settlement process.

The Tribunal held that the airline had followed the correct procedure by applying for a refund under the category of excess payment of tax.

It relied on the CBIC circular’s clarification that registered persons may seek a refund through Form GST RFD-01 where no output liability exists against which a credit note can be adjusted.

The Bench found that the first appellate authority had failed to apply the circular in its proper spirit. Accordingly, the objection that the airline had incorrectly selected the refund category was unsustainable.

The ruling recognises the refund mechanism available where tax has been returned to customers but the corresponding credit notes cannot be absorbed against output liability.

The Tribunal also considered the objection that the airline had not ensured reversal of input tax credit by recipients before seeking a reduction in its tax liability.

It found that the passenger transactions were predominantly business-to-consumer transactions, where the question of availing and subsequently reversing ITC did not arise.

The order separately recorded a submission concerning a credit note issued to Balmer Lawrie & Co. Ltd. The airline argued that the obligation to reverse any ITC lay with the recipient.

In its reasoning, the Tribunal distinguished the statutory provision applicable during the disputed period from the express ITC-reversal condition introduced in the proviso to Section 34(2) with effect from October 1, 2025.

For the earlier period, the Bench examined whether the incidence of tax had been passed on. It noted the airline’s declaration and the evidence of full refunds to passengers, and concluded that the conditions applicable to the credit notes had been satisfied.

The Bench referred to the Supreme Court’s October 1, 2020 decision in Pravasi Legal Cell v. Union of India, which issued directions concerning refunds for flights affected by lockdown restrictions, including tickets booked through travel agents.

The Tribunal found that Singapore Airlines had returned the entire fare, including GST, to the passengers. It therefore concluded that the airline had furnished sufficient evidence to establish that the tax burden had been returned and that there was no passing on of the incidence of tax.

The department was directed to process every refund claim within two weeks from the date of the Tribunal’s order and make payment with applicable interest from the original application dates until actual payment.

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