IGST on Aircraft Repairs Abroad: What Supreme Court Ruled
The Supreme Court has ruled that Integrated GST (IGST) cannot be levied retrospectively on aircraft repair services carried out outside India. This landmark decision brings clarity to Indian airlines that send aircraft abroad for maintenance and overhaul.
Focus keyphrase: IGST on aircraft repairs
What Was the Issue?
Between July 2017 and July 2022, several airlines had sent aircraft abroad for repairs. The tax department later claimed that these services qualified as “import of service” and should attract IGST under the reverse charge mechanism.
However, airlines contested this, arguing that the service was rendered entirely outside India and should not be taxable unless the law was amended with prospective effect.
Supreme Court’s Verdict
In a July 2024 ruling (Civil Appeal Nos. 2487–2489/2023), the SC held:
- IGST cannot be levied retrospectively on such services.
- Notification No. 03/2022-Integrated Tax (Rate) dated 13.07.2022, which deemed MRO services performed abroad as taxable imports, is prospective in nature.
- Tax liability cannot be backdated unless Parliament explicitly provides for retrospective operation in the law.
What Is IGST on Aircraft Repairs?
IGST applies when services are imported under Section 5 of the IGST Act, 2017. For this to happen:
- The recipient must be in India
- The supplier must be outside India
- The place of supply must be in India
But here’s the catch: Aircraft sent abroad for repair involve the entire service taking place outside Indian territory. Hence, the “place of supply” is not in India.
Until 13.07.2022, there was no legal mechanism under GST to deem this an import of service.
Timeline of Key Developments
| Date | Event |
|---|---|
| 01 July 2017 | GST implemented in India |
| Pre-2022 | No specific provision taxing aircraft repairs abroad under IGST |
| 13 July 2022 | Notification No. 03/2022 issued to tax overseas MRO services |
| July 2024 | SC rules that this notification applies only prospectively |
Why This Matters for Airlines & MROs
- No tax dues for prior periods: Airlines can now avoid tax demands for services received before 13.07.2022
- Certainty in compliance: Future transactions involving overseas repairs must factor IGST
- Boost for Indian MRO industry: May push airlines to explore local MRO units to avoid complications
Expert View:
“This ruling reiterates a fundamental tax principle — unless the law expressly states, tax laws can’t be applied with a retrospective hammer. It’s a win for legal clarity,” says CA Rohit Menon, Indirect Tax Advisor.
Legal References
- IGST Act, 2017 – Section 13 on “place of supply” rules
- Notification No. 03/2022 – Integrated Tax (Rate) dated 13.07.2022
- Supreme Court Judgment in Civil Appeal Nos. 2487–2489/2023
Practical Tips for Airlines
- Check your past tax assessments: You may be eligible to contest earlier demands.
- For services post 13.07.2022: Ensure proper reverse charge IGST compliance.
- Keep documentation on service location, invoices, and aircraft movement records.
FAQs
Q1. Is IGST payable on aircraft repairs done outside India now?
Yes, if the service is availed after 13.07.2022, IGST is applicable under RCM.
Q2. Can I claim ITC on IGST paid on such repairs?
Yes, subject to eligibility and invoice compliance, ITC can be availed.
Q3. What if I received a show-cause notice for FY 2018–2020?
This SC judgment can be used as a defence. Seek professional advice to reply accordingly.
Summary
The Supreme Court has held that IGST on aircraft repairs conducted abroad cannot be levied retrospectively. Services availed before 13.07.2022 are not taxable. This ruling benefits Indian airlines facing past tax demands and clarifies compliance for future overseas maintenance jobs.
Final Word
This Supreme Court verdict brings a much-needed sigh of relief to airlines battling retrospective tax notices. For updated GST insights and compliance support, connect with Efiletax today — your trusted partner in navigating Indian tax laws.