2026-VIL-223-GSTAT-ERN
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  2. 2026-VIL-223-GSTAT-ERN

SGST Tribunal

GST - Refund of tax collected on air tickets cancelled during the Covid pandemic - Sufficiency of evidence under Section 54(4) of CGST Act - The Appellant-airline filed refund claims of GST collected on tickets sold mostly through IATA agents and settled through the Billing Settlement Plan, which were cancelled and the entire fare including GST was refunded to the passengers – Rejection of appeals on the ground that the Appellant failed to establish excess payment of tax or reimbursement to passengers and that a one-to-one correlation between the travel agent and the passenger was not possible - Whether the Appellant is eligible for refund of GST collected from the passengers and paid to the Department, but subsequently refunded along with the fare to the passengers on cancellation of flights due to the pandemic in terms of the order of the Supreme Court - HELD - The Appellant had submitted sample copies of air tickets, tax invoices, credit notes and the corresponding BSP files before the adjudicating authority and the FAA, which were not appreciated. The ticket number and the passenger name are common to the refund voucher, the tax invoice and the credit note, and provide an undeniable connection between the invoice and the credit note issued for refund of the fare to each passenger. The mode of payment used for purchase of the ticket is also reflected in the refund voucher - The FAA and the adjudicating authority failed to examine this visible information and rejected the refund on flimsy grounds. The entire amount including GST was refunded to the passengers, no amount was retained by the Appellant, and there is no unjust enrichment - The BSP is a trusted framework used by airlines and agents for settlement of amounts collected and of refunds on cancellation. The Appellant also filed an undertaking that no passenger had complained of non-receipt of refund. The Appellant has provided sufficient evidence that the refund of the cancelled tickets reached the respective passengers directly and that the incidence of tax was not passed on - The Appellant is eligible for the refund, the order of the FAA is set aside - The Respondent is directed to process the refund claims with applicable interest from the date of the original refund application till payment – The appeal is allowed - Refund claimed as excess payment of tax where credit notes could not be adjusted against output liability - Circular No. 137/07/2020-GST - The Appellant issued credit notes against tax invoices on cancellation of tickets, but as there were no scheduled flights and no outward supply, the credit notes could not be adjusted in the return. The Appellant therefore filed refund claims under the category of excess payment of tax in Form GST RFD-01, and the FAA held that the Appellant had wrongly claimed the refund as excess payment of tax as there was no excess payment - Whether the refund claim filed as excess payment of tax in the absence of output tax liability to adjust the credit notes is the correct procedure - HELD - The Circular clarifies that where a credit note is issued, the tax liability is to be adjusted in the return, but in cases where there is no output liability against which a credit note can be adjusted, registered persons may proceed to file a claim under excess payment of tax, if any, through Form GST RFD-01. The FAA did not apply the Circular in letter and spirit. The Appellant has correctly followed the procedure by claiming the refund in the present manner - The reasoning of the FAA for rejecting the appeals is not sustainable and the order of the FAA is set aside - Credit notes under Section 34(2) of CGST Act - Reversal of ITC by recipient and incidence of tax - The FAA held that the unadjusted credit notes were time-barred under Section 34(2), that the credit notes were issued to travel agents and not to passengers, and that the Appellant must ensure that the agents have reversed the ITC before reducing its GST liability - Whether the conditions of Section 34(2) were satisfied in respect of the credit notes issued during the relevant period so as to entitle the Appellant to refund - HELD - All the tickets were issued in the name of individual passengers and the transactions are B2C transactions, so that there is no question of availing ITC and subsequently reversing it. Section 34 permits a supplier to issue a credit note where tax liability is reduced due to cancellation, and the obligation of reversal lies with the recipient under Section 16(2) read with Rule 37 of the CGST Rules. The proviso requiring reversal of ITC by the recipient was inserted only with effect from 1-10-2025, and the earlier proviso restricted reduction of liability only where the incidence of tax had been passed on to any other person. The question of reversal of ITC for the relevant period therefore does not arise - The Appellant submitted a self-declaration under Rule 89(2)(l) and, having refunded the entire amount to each passenger, the question of passing the incidence of tax does not arise. The matching of credit notes in the recipient's returns would automatically trigger reversal of ITC even in respect of any B2B buyer, and the Revenue brought no such evidence. The Appellant has satisfied the conditions of Section 34(2) while issuing the credit notes - The findings of the FAA are not sustainable and set aside.
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