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

Singapore Airlines won a GST Appellate Tribunal (GSTAT) ruling related to refunds on cancelled flights. The Ernakulam bench found the airline could recover GST it had paid to the government after fully refunding passengers, including the tax, when refunds exceeded new bookings during the COVID-19 disruptions.

The tribunal evaluated documents such as passenger tickets, tax invoices, credit notes, refund vouchers and settlement records to establish a connection between cancelled bookings and the refunds issued to travelers. It concluded that passengers had indeed received the refunds and that the airline had not retained the GST collected from them.

A key point in the ruling was the application of the unjust enrichment principle, which prohibits a business from getting a government tax refund if it has already passed the tax burden to customers. The tribunal found the tax burden had been returned to passengers in this case.

The decision also referenced an April 2020 CBIC clarification, which provides a mechanism for claiming excess tax refunds when credit notes cannot be adjusted against output tax liability. Based on this, the GST authorities were instructed to process the eight refund claims amounting to ₹45.92 lakh with applicable interest.

The ruling clarifies GST treatment for cancelled bookings under pandemic-era circumstances but does not create a universal rule that all airlines must refund the entire ticket price if a passenger cancels. Refunds for individual passengers will still depend on fare conditions, the reason for cancellation, and applicable aviation regulations.

For travelers, the guidance emphasizes reviewing original invoices and refund statements to identify the airfare, GST charged, any cancellations deductions, and the final refunded amount. If a refund is handled by a travel agent or platform, travelers should verify credits from both the airline and the intermediary.