18% GST on User Development Fee: What Airline Passengers Must Know
The GST rate on User Development Fee (UDF) collected by airline operators has been a matter of confusion. A recent clarification by MoS Finance, Shri Pankaj Chaudhary, in the Lok Sabha has confirmed that 18% GST is applicable on User Development Fees, as they fall under a taxable service provided by airport operators to airlines.
This update matters for passengers and airlines alike, especially when interpreting ticket pricing and tax breakdowns.
What is User Development Fee (UDF)?
It appears separately in your airline invoice/ticket breakdown.
Is GST Applicable on UDF?
Yes — 18% GST is applicable.
As per the Finance Ministry’s reply in Lok Sabha on 22 July 2024, the GST law does not exempt User Development Fee from taxation.
This applies when:
- Collected by airlines from passengers
- Remitted back to the airport
Legal Reference
- Lok Sabha Unstarred Question No. 2558, answered on 22.07.2024
- MoS Finance Pankaj Chaudhary stated that GST @18% applies on UDF
Relevant link (official):
https://www.indiabudget.gov.in/ (For replies to parliamentary questions)
GST Treatment: UDF vs PSF
| Particulars | UDF (User Development Fee) | PSF (Passenger Service Fee) |
|---|---|---|
| Charged by | Airport Operators | Security Agencies/Airports |
| Collected by | Airline Operators | Airline Operators |
| Purpose | Infra development & amenities | Security & facilitation |
| GST Applicability | Yes (18%) | Yes (18%) |
| Exemption under GST? | Not exempt | Not exempt |
Why This Clarification Matters
- Some airlines were not charging GST on UDF, citing ambiguity.
- Misclassification of UDF could lead to underpayment of GST and compliance risk.
- With this clarification, all airline tickets must reflect 18% GST on UDF going forward.
Expert Tip from Efiletax
Airlines must update ticketing systems to show GST breakdown clearly for UDF.
Passengers should cross-check invoices and report discrepancies if UDF is charged without GST.
FAQs on GST on UDF
Q1. Is GST applicable if UDF is included in the total fare?
Yes, GST applies regardless of whether UDF is shown separately or embedded in fare.
Q2. Can airlines claim ITC on UDF-related GST?
Yes, if UDF is used in the course of business and conditions under Section 16 of CGST Act are satisfied.
Conclusion: Ensure GST Compliance on UDF Charges
The 18% GST on User Development Fee is now officially clarified. Airline operators must ensure proper tax accounting and disclosure. Passengers should also stay aware while reviewing ticket cost breakdowns.
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Summary
The government has clarified that 18% GST applies to User Development Fees (UDF) collected by airlines on behalf of airport operators.