CESAT classifies charter of aircraft as transport of passenger service

Mar25,2024



Mumbai: In a recent judgment, the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), Ahmedabad bench has classified air charter as air transportation of passenger service rather than supply of tangible goods service.
CESTAT's decision was based on several factors, including the taxpayer's registration with the Directorate General of Civil Aviation (DGCA) as an aircraft operator. As per Rule 3(9) of the Aircraft Rules, 1937, “air transport service” is defined as a paid service of transportation of persons or goods by air, whether by a single flight or a series of flights. This definition is consistent with civil aviation requirements (CAR), which provides a uniform definition for both scheduled and non-scheduled services.
Under CAR, the carriage of passengers by the holder of a non-scheduled operator's permit may be carried out on a per seat basis or by hiring whole aircraft on a per flight basis or both. CESTAT notes that charter operations are a sub-category non-scheduled air operations And aircraft operations do not stop merely because the entire aircraft has been leased from the aircraft operator. Therefore, the activity cannot be classified as supply of aircraft by the operator to the charterer.
In charter operations, the individual passenger is not required to sell any tickets, and the charter may be for a single trip or for multiple trips over a period of time. The CESTAT decision classified this service under air transport of passenger service.
According to EY-India, this decision is significant under the Goods and Services Tax (GST) regime, as the tax rate and place of supply are different for both service categories under GST. Additionally, this decision is expected to have a positive impact on the eligibility of input tax credit for recipients of charter services, as there are previous instances where the Revenue has disallowed input tax credit on charter services on the grounds that the credit on aircraft hire is Not available. Services.



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