NEW DELHI: In a recent development, the Directorate General of Goods and Services Tax Intelligence (DGGI) has initiated investigations into airlines retaining taxes collected from customers in cases of no-show by passengers, sources told TNIE.
The issue revolves around whether airlines can rightfully keep taxes, including GST, when a passenger fails to board a flight. The sale of airline tickets is subject to GST, with economy class tickets taxed at 5% and business class tickets at 12%.
However, concerns have been raised regarding the taxation of consideration collected from passengers who do not avail of the airline service due to a no-show scenario, as per government sources.
Abhishek A Rastogi, founder of Rastogi Chambers, emphasised that in instances of no-show, where the passenger does not utilise the airline service, the question arises as to whether the taxes collected should be refunded to the customer.
Additionally, he said, “While economy class ticket is taxed at 5%, business class ticket is taxed at 12%. In no-show, the customer has not availed any service or in other words, has not availed the service of an airline passenger. Accordingly, the issue remains whether the consideration collected by (airline) be taxed at 0%, 5/12% or 18%.”
With one airline already having paid tax following DGGI scrutiny, the industry awaits further regulatory actions and potential probes into tax recovery from other airlines.
The debate continues on whether airlines should refund GST collected from no-show passengers, sparking discussions on the appropriate tax rate for consideration retained in such cases.
“Ideally, the airline must refund the GST collected from the customer as the airline service was never provided. Further, from the consideration towards service received, the tax, if any, must be calculated on the retained amount at the rate to which such retention amount pertains to,” stated Rastogi.