In a significant relief to Indian airlines such as IndiGo and SpiceJet, the Supreme Court on Monday dismissed an appeal by the Customs Department seeking to impose Integrated Goods and Services Tax (IGST) on re-imported aircraft and spare parts that were sent abroad for repairs. The tax demand was based on a 2021 notification attempting to retrospectively modify a 2017 exemption order.
The bench of Justices B.V. Nagarathna and K.V. Viswanathan refused to admit the appeal filed by the customs authorities challenging an August 2024 decision of the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which had struck down the retrospective tax demand. CESTAT had ruled that imposing IGST retroactively would unfairly burden the aviation sector.
The legal dispute traces back to the implementation of the Goods and Services Tax (GST) regime in July 2017. Notification No. 45/2017-Customs, issued on June 30, 2017, exempted re-imported aircraft parts from IGST, limiting the applicable tax to basic customs duty (BCD) on the cost of repairs, freight, and insurance. Airlines continued to follow this structure, assuming IGST was not applicable.
However, customs officials later argued that under the GST framework, the term “duty of customs” also includes IGST, and began raising tax demands from August 2017. These demands were challenged by several airlines before the tribunal.
In November 2020, CESTAT ruled in favour of the airlines, stating that IGST was not covered by the 2017 notification as it was not explicitly mentioned. The government appealed this decision before the Supreme Court, which admitted the appeal, and that case is still pending.
Meanwhile, on July 19, 2021, the government issued Notification No. 36/2021-Customs, amending the 2017 notification to specifically include IGST and compensation cess on re-imported goods. The amendment claimed to merely “clarify” the original intent of the law, and customs authorities then attempted to apply the IGST demand retroactively from July 1, 2017, to July 18, 2021.
This move was once again challenged by the airlines. On August 5, 2024, CESTAT held that such retrospective imposition of IGST was not legally tenable and quashed the tax demands. The customs department’s appeal against this ruling led to Monday’s Supreme Court decision.
During the hearing, Additional Solicitor General N. Venkataraman urged the court to admit the appeal, arguing that nearly ₹100 crore in revenue was at stake and that interpretation of the 2017 notification remained a live issue before the apex court. He contended that even if the 2021 notification was held invalid for its retrospective nature, IGST could still be levied under the original 2017 rules.
However, the bench was not persuaded. “You can’t do it by a retrospective amendment. If the 2017 notification did not include IGST, the 2021 clarification cannot be used to enforce it retrospectively,” the court remarked before dismissing the appeal.
The case involves nearly 1,800 bills of entry—import declarations made for aircraft and parts re-imported after overseas repairs. As of July 2024, India applies a uniform 5% IGST on all imports of aircraft components and MRO (maintenance, repair, and overhaul) items as part of policy efforts to support the aviation sector.
In a parallel development, the Delhi High Court on March 4, 2025, had also declared unconstitutional parts of the 2021 notification that sought to impose IGST and cess on repair costs of re-imported goods. That judgment has not yet been challenged by the government in the Supreme Court.
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