Intro:
The Supreme Court’s recent ruling on IGST for aircraft repairs abroad offers major relief to Indian airlines. The Court held that no integrated GST (IGST) can be levied on aircraft sent overseas for repairs when no consideration is involved. This judgment simplifies a long-standing issue and clarifies the law on place of supply and import of services.
Why this IGST issue mattered
For years, the aviation sector struggled with GST demands when sending aircraft to foreign MRO (maintenance, repair and overhaul) units. The Department often claimed such repairs amounted to import of service, taxable under reverse charge.
Key arguments involved:
- Was there a “consideration”?
- Did it amount to import under Section 2(11) of the IGST Act?
- Could it fall under deemed supply or Schedule I?
What the Supreme Court held
In Commissioner of Central Excise & Service Tax vs InterGlobe Aviation Ltd (IndiGo), the SC upheld the Delhi High Court’s view:
No IGST liability when:
- No service provider–recipient contract exists
Key legal point:
Without “consideration”, there’s no “supply” under Section 7 of the CGST Act, and hence, no GST.
Reference: [SC Order – July 2024 dismissal of SLP (Civil) Diary No. 39426/2023]
Legal basis simplified
| Issue | What the Law Says | SC Position |
|---|---|---|
| Import of service | Needs “consideration” + cross-border + benefit | Not met if free |
| Supply under GST | Needs consideration unless deemed supply | No deemed supply |
| Schedule I (deemed supply) | Applies only when both parties are related OR distinct persons | Not applicable here |
Expert View
GST Advisor Tip:
But document it well. File shipping bills, create internal memos, and maintain audit trail.
What taxpayers should note
- This ruling may impact other sectors too — e.g. ships, machinery, or engineering equipment sent abroad for free servicing.
- CBIC may need to issue clarifying circulars to align field formations with the SC view.
Impact on aviation companies
- Avoids huge IGST burdens from past years
- Improves cash flow and working capital
- Reduces litigation on reverse charge for foreign MROs
- Encourages use of global MRO partners without tax fear
Related Legal Reference
- Section 7(1)(a), CGST Act – defines “supply”
- Section 2(11), IGST Act – defines “import of services”
- Schedule I, CGST Act – defines deemed supply rules
- Delhi HC in InterGlobe case – clarified non-taxability without consideration
- SC Dismissal – July 2024 – upheld no IGST on non-consideration repairs abroad
FAQ: IGST on Repairs Abroad
Q1. Is IGST applicable if aircraft is sent abroad for paid repairs?
Yes, if consideration is paid and place of supply is India, reverse charge may apply.
Q2. What if spares are replaced during free repair?
If spares are charged, that part may attract IGST as import of goods.
Q3. Does this apply to other industries too?
Yes. Same principle applies if no consideration is paid for foreign repairs.
Q4. Should I file GST return entry for such movement?
Yes. Record it as non-GST outward supply or non-taxable movement for audit clarity.
Summary
This benefits aviation firms and clarifies GST treatment for cross-border services without consideration.
Closing CTA:
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