GST on Airport Levies
GST on Airport Levies
As per latest circular from the Ministry of Finance on 11th October 2019, the CBIC has issued a clarification for GST applicable on airport levies, stating that since airport levies do not form a part of the value of services provided by airlines, no GST should be charged to airlines on such airport levies.
The CBIC has recognised that airport levies such as passenger service fees (PSF) and user development fees (UDF) are merely collected by the airlines as ‘pure agents’ on behalf of Airport operators, and as such, GST on airport levies shall not apply to airlines.
Airport operators collect, through airlines, a certain amount as Passenger Service Fee (PSF) from travelling passengers. This amount is charged to passengers for the development of airport infrastructure and facilitation of the travellers. Further, at major airports, in order to avoid inconvenience to passengers and for smooth and orderly air transport/airport operations, a certain amount is charged as User Development Fees (UDF) by the airlines at the time of issue of an airline ticket. Both these airport levies, i.e. PSF and UDF, collected by the airlines from passengers, are later forwarded to the Airports Authority of India as per the relevant procedures.
For this service of collecting the airport levies from the passengers, a charge of Rs.5 is made by the airlines to Airport Authority of India, which cannot be passed onto passengers.
Thus, the CBIC notification recognised that the airport levies, i.e. PSF and UDF, are effectively charged by the airport operators for providing services to airline passengers.
Airport levies collected are a ‘consideration’
According to Section 2(31) of the CGST Rules, “consideration” includes any payment made, via money or otherwise, for the supply of goods and/or services by the recipient of such goods and/or services. Thus, Passenger Service Fee and User Development Fee charged by airport operators are a “consideration” for providing services to passengers. Prior to the implementation of GST, UDF was liable to service tax.
These charges are collected by the airlines as an agent and is not as a consideration for any service provided by the airlines themselves. Thus, the airlines are not responsible for payment of GST on UDF or PSF, as long as they acts as ‘pure agents’ under Rule 33 of the CGST Rules
According to Rule 33 of the CGST Rule
All expenses or costs borne by a supplier as a ‘pure agent’ shall be deducted from the value of goods and services supplied under the following conditions:
- When the said supplier makes the payment to the third party on authorisation from the recipient of the goods and services;
- the payment made by the pure agent is stated separately in the invoice issued to the recipient; and
- the supplies procured from the third party are in addition to the services he supplies on his own account to the recipient
As such, the airline acting as a ‘pure agent’ of the passenger shall:
- Separately indicate the actual amount of PSF and UDF and GST payable on such PSF and UDF by the Airport Operator, in the invoice issued by airlines to its passengers.
- Only recover the actual PSF and UDF and the GST payable on such PSF and UDF by the airline operator and
- The amount thus recovered will be omitted from the value of supplies made by the airline itself to its passengers.
Who can claim Input Tax Credit
- The airline shall not take Input Tax Credit of GST payable or paid on airport levies such as PSF and UDF.
- The airline passengers, being the final recipient of the airport services, may take Input Tax Credit of GST paid on PSF and UDF on the basis of the invoice bill issued by the airlines.
- Airport operators also pay collection charges to airlines for the collection of airport levies from passengers. These charges, by definition, are a consideration for services provided by the airlines to the airport operators and, as such, airlines shall have to pay GST on the same under forward charge.
- Input Tax Credit of such collection charges will be available with the airport operators.
GST on airport levies payable by airport operators
Airport operators are collecting PSF and UDF inclusive of GST from passengers through the airlines, and therefore, they are required to pay such GST collected by them to the Government, the CBIC noted. The clarification is notified through a circular which can be found below:GST on Airport Levies