Flight cancellation refund: Can airlines keep the GST charged on your ticket? Here's what the tribunal ruled

Airlines Can Recover GST After Refunds

The Goods and Services Tax Appellate Tribunal (GSTAT) has permitted Singapore Airlines to recover ₹45.92 lakh in GST tied to flights cancelled during the COVID-19 pandemic. The ruling, delivered on October 16, 2026, by the Ernakulam bench comprising Vice-President Subramanya Rayaprol and Technical Member Ramamoorthi Sriram, addressed a situation where the airline had refunded passengers the full fare, including the tax component, but could not adjust the tax already deposited with the government.

The airline had cancelled several flights and returned ticket fares, including GST, to passengers. It issued credit notes for these refunds. Under normal circumstances, credit notes allow a business to offset tax liability against future sales. However, because cancellations and refunds outpaced new bookings during the pandemic, the airline lacked sufficient output tax liability to absorb the adjustment. It filed eight refund claims totalling ₹45,92,528 for October 2019 to March 2021.

Why the Ruling Matters for Businesses

Tax authorities had rejected the claims, questioning whether the airline provided adequate proof that refunds reached passengers. The tribunal examined tickets, tax invoices, credit notes, refund vouchers and settlement records, and found a clear link between cancelled bookings and amounts returned. It concluded that passengers had received the refunds and the airline had not retained the GST collected from them.

This finding is significant because GST refund claims are subject to the principle of unjust enrichment, which generally bars a business from recovering tax from the government if it has already passed the burden to customers and not returned it. The tribunal also relied on an April 2020 CBIC clarification that provides a mechanism for claiming refunds of excess tax when credit notes cannot be adjusted against output tax liability. It set aside the rejection and directed the department to process the cla…