GST Update on Airline levies

GST Update on Airline levies
Government has issued a series of Circulars on 11^th October 2019. In this update we shall discuss in detail one of the circulars being issued vide circular No. 115/34/2019-GST dated 11^th October 2019. This circular intends to give clarification on issue of GST on Airport levies.
In this circular, clarification is being given on taxability of GST on the charges like Passenger Service Fee (PSF) and User Development Fee (UDF) being collected by the Airlines on behalf of Airport operators from the passengers and the availment of credit with respect to such charges to the passengers. Passenger Service Fee (PSF) is collected by the airport licensee from embarking passengers at rates as specified by the Central Government which shall be utilized for infrastructure and facilitation of the passengers. User Development Fee (UDF) is being levied by the licensee at a major airport.
The above charges are subject to GST as these are consideration being received for services provided to Passengers. The definition of Consideration as per Section 2(31) of the CGST Act 2017 is being reproduced below
““consideration” in relation to the supply of goods or services or both includes––
(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;
(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:
Provided that a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply; “
In this case the airline acts as a Pure Agent between Airport operators and passengers, so the board clarifies that airline should separately indicate actual amount of PSF and UDF and GST payable on such PSF and UDF by the airport licensee, in the invoice issued by airlines to its passengers. The airline shall not be eligible to take credit on the GST paid on such charges. The amount so recovered from passengers as pure agent shall not be included in the value of supply made by airlines and so GST shall not be leviable. The Airline shall indicate in the invoice being raised to the passengers that the charges being collected are in the capacity of Pure Agent and GST is inclusive in it. This indicates that the registered passengers may take credit of GST paid on PSF and UDF on the basis of this invoice.
So it is the ultimate responsibility of the airport operators to pay GST on the PSF and UDF collected by them from the passengers through the airlines to the Government.
Let us summarize the above as follows

Airline Air Asia shall raise the invoice to the passengers as

Flight charges Rs. 5,000/-
(+) PSF(*) Rs. 500/-
(+) UDF(*) Rs. 500/-
Gross Total Rs. 6,000/-
(+) GST @ 18% (on Rs. 5000/-) Rs. 900/-
Net Total Rs. 6,900/-
(* PSF and UDF charges are being collected by us in the capacity of pure agent on behalf of Airport operators and is inclusive of GST)

Airport operator Chatrapathi Shivaji Airport shall deposit the GST payable on PSF and UDF to the government.

And the registered passengers shall be eligible to take ITC on the flight charges and on tax charged on PSF and UDF charges as well.

But the difficulty that shall arise here is that how can the registered passenger take ITC of the tax charged on PSF and UDF as this shall not be reflected in the GSTR-2A of the passenger. The airline will be acting as pure agent and will not pay the tax. Hence, they will not show the same in the GSTR-1 return. Consequently, it will not come in GSTR-2A of passenger. The airline operator will raise the bill in the name of airlines and not in the name of passenger. Thus, airline operator will file GSTR-1 and fill the details of airlines. But airlines will not take the credit on the same. But in any case, it will not come in the GSTR-2A of passenger. Then he will not be able to take the credit.
However, the circular says that the passenger can take the credit. Whether the circular go beyond the Act? Further, Notification No. 49/2019- central Tax was issued on 9^th October, 2019 wherein Sub rule 3 of Rule 36 has been inserted which states that a registered person shall avail input tax credit in respect of invoices or debit notes, the details of which have been not uploaded by the supplier in GSTR-2A only upto 20% of the eligible credit available of which have been uploaded on the portal.
The complexities in GST have been increasing continuously irrespective of getting settled.

This is solely for educational Purpose.
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GST Update on Airline levies

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