The Goods and Services Tax framework in India provides for the adjustment or refund of tax paid on transactions that are cancelled or reversed. However, it may become practically difficult where a supplier has already deposited the tax with the Government but is unable to adjust the related credit notes against its output tax liability. Such situations became more predominant during the COVID-19 pandemic, when extensive cancellation of services resulted in refunds to customers and inability of businesses to adjust their tax liabilities.
In a recent decision in Singapore Airlines Ltd. vs Commissioner of CGST & CE, Kochi, the Goods and Services Tax Appellate Tribunal (GSTAT), Ernakulam Bench, examined whether an airline could claim a refund of GST paid on cancelled flight tickets where the entire ticket amount, including tax, had been returned to passengers. By its order dated October 16, 2026, the Tribunal allowed the airline’s appeals and directed the Revenue Department to process the refund claims along with applicable interest.
Background of the Case
Singapore Airlines Ltd., an international airline operating through branch offices in India, had collected and deposited GST on air tickets sold to passengers. During the COVID-19 pandemic, travel restrictions resulted in large-scale flight cancellations and a significant increase in requests for refunds.
The airline refunded the ticket amounts, including GST, to the passengers and issued corresponding credit notes. However, as the refunds exceeded ticket sales during the relevant periods, the airline could not adjust the entire value of the credit notes against its output tax liability. The GSTR-3B return did not permit reporting of negative tax liability, and the remaining credit notes could not be adjusted within the prescribed statutory period.
Thus, the airline filed 8 refund applications under the category of “Excess Payment of Tax” in Form GST RFD-01, claiming a total refund of INR 45,92,528 for the periods October 2019 to March 2020, January 2021 and March 2021. The jurisdictional authority rejected the applications on the ground that sufficient documents had not been provided to establish excess payment of GST or demonstrate that the amounts collected from passengers had actually been refunded.
The Joint Commissioner (Appeals), Kochi, upheld the rejection, observing that the unadjusted credit notes had become time-barred under Section 34(2) of the Central Goods and Services Tax Act, 2017 (CGST Act), and that a direct correlation between the travel agents and passengers could not be established. Aggrieved by the rejection, the airline approached the GSTAT.
Submissions Before the Tribunal
The airline submitted that most of its ticket sales were conducted through travel agents registered with the International Air Transport Association (IATA). Payments for these transactions were settled through IATA’s Billing and Settlement Plan (BSP), which recorded ticket sales and refunds and facilitated settlement between airlines and agents.
It was submitted that refunds were processed through the agents who had originally issued the tickets and credited through the original payment channels. The airline relied upon tax invoices, credit notes, refund vouchers and corresponding BSP settlement records to establish that the ticket amounts, including GST, had been returned to the passengers. The airline further relied upon CBIC Circular No. 137/07/2020-GST dated April 13, 2020, which permitted registered persons to claim refunds under the category of excess payment of tax where no output tax liability was available for adjustment of credit notes.
The Revenue Department maintained that the documents did not convincingly establish that the tax component had reached the ultimate passengers. It contended that the BSP statements reflected settlements between airlines and agents but did not independently demonstrate refunds to individual customers, as required under Section 54(4) of the CGST Act.
Tribunal’s Findings
The Tribunal examined the airline’s ticketing and refund mechanism and observed that IATA’s BSP provided a standardised framework for settlement of sales and refunds between airlines and accredited travel agents. On examining the documents submitted by the airline, the Tribunal found that the refund vouchers, tax invoices and credit notes contained common identifying details, including ticket numbers and passenger names. These details established a direct connection between the original transaction, cancellation and corresponding refund. The refund vouchers also contained information relating to the original payment method.
It was held that the documents sufficiently provided that the entire ticket amounts, including GST, had been refunded to the respective passengers. The Tribunal noted that both the original adjudicating authority and the first appellate authority had failed to properly appreciate the documents already available on record.
The Tribunal also referred to the Supreme Court’s decision in Pravasi Legal Cell vs Union of India, dated October 1, 2020, which issued directions regarding refunds for flights cancelled during the COVID-19 restrictions, including refunds for tickets booked through travel agents. Since the airline had returned the entire amount collected from passengers and had not retained the tax component, the Tribunal found that there was no unjust enrichment.
Further, the Tribunal examined the applicability of Circular No. 137/07/2020-GST paragraph 3, which clarifies the procedure for adjusting tax liability through credit notes. The Circular provides that where goods are returned after issuance of a tax invoice, the supplier may issue a credit note under Section 34 of the CGST Act and adjust the tax liability in the relevant return, subject to certain conditions. It further clarifies that where no output tax liability is available for such adjustment, the registered person may file a refund claim under the category of “Excess Payment of Tax, if any” through Form GST RFD-01.
Applying this, the GSTAT held that the airline had followed the correct procedure in filing its refund applications. The inability to adjust credit notes against output tax liability did not justify rejection of the refund claims when the procedure adopted was expressly recognised under the Circular.
The Tribunal also considered the objection relating to reversal of Input Tax Credit (ITC) by recipients of the supply. It was noted that the tickets were mostly issued to individual passengers and constituted business-to-consumer (B2C) transactions. Therefore, the question of passengers availing and afterwards reversing ITC did not arise.
The Tribunal also examined the amendment to Section 34(2) of the CGST Act, introduced through the Finance Act, 2025, with effect from October 1, 2025, relating to reversal of attributable ITC by registered recipients. It was held that this requirement could not be applied to the transactions between October 2019 and March 2021. The airline had also submitted a declaration under Rule 89(2)(l) of the CGST Rules regarding the incidence of tax. The Tribunal concluded that the statutory requirements applicable to the relevant period had been satisfied.
Decision of the GSTAT
The GSTAT set aside the order of the Joint Commissioner (Appeals) and allowed all 8 appeals with significant relief. The Revenue Department was directed to process the refund claims within 2 weeks from the date of the order and make payment along with applicable interest from the dates of the original refund applications until actual payment.
Conclusion
The decision clarifies that GST refunds are available where credit notes cannot be adjusted due to insufficient output tax liability. However, it is important for the claimant to establish that the transactions were cancelled and the tax amounts were returned to customers. The ruling highlights the relevance of the refund mechanism prescribed under the GST framework and the need to assess claims in accordance with the provisions applicable to the relevant period.
Authors: Manisha Singh and Shivi Gupta