GST AAR: Tax Will Be Applicable to the AAI-Adani Pact for the Airport in Thiruvananthapuram, Kerala

The Kerala bench of the GST Authority for Advance Ruling (AAR) cited that the concessionaire agreement between the AAI and Adani Thiruvananthapuram International Airport Ltd is not a ‘transfer of business’, but a supply of services and therefore is obligated to GST.

The judgment of the Kerala AAR ruling is opposite to the rulings passed via the Rajasthan and Gujarat Appellate Authority for Advance Ruling (AAAR) in the matter of the transfer of Jaipur and Ahmedabad airports and Uttar Pradesh AAR in the matter of Chaudhary Charan Singh International Airport in Lucknow. These transfers are been waived by the authorities from the goods and services tax (GST).

In its application, the Airports Authority of India (AAI) to the AAR mentioned that it has entered into a concessionaire agreement with Adani Thiruvananthapuram International Airport Ltd for the operation, management, and development of the airport for 50 years.

AAI asked for the judgment from the AAR on the issues along with that the agreement comprises of business and whether the same is a transfer which shall be regarded as the ‘supply as going concern’ and be waived from GST.

As per AAR it carried that it does not comprise a transfer of business via the applicant to the concessionaire and the transaction could not be regarded as the transfer as a going concern.

The AAR articulated in a ruling passed dated January 10 that the service is been supplied by the concessionaire of developing the airport of the petitioner who is furnishing the manpower, leasing, etc before the concessionaire and both comprise the supply u/s 7 of the GST Act.

If the GST is charged on the transfer of existing assets, aeronautical/non-aeronautical assets, and capital work in progress by M/s AAI to M/s Adani Thiruvananthapuram International Airport Ltd, the AAR mentioned that the “assets have not been transferred” and the GST is levied to be paid on the amounts obtained as consideration for leasing/supply of the assets to the concessionaire.

As per the bench, GST is to be imposed on the annual concession fees charged via the applicant from the concessionaire.

On the invoices, an 18% GST shall be charged via the applicant towards the reimbursement of salary/staff cost of the concessionaire.

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The decision of the AAR citing that the transfers of airports, like Jaipur and Ahmedabad, qualify as “going concern” transfers, and would, be waived from GST, the Rajasthan and Gujarat AAAR kept.

Likewise, the transfer of Chaudhary Charan Singh International Airport in Lucknow to Adani Lucknow International Airport Ltd is also an existing concern and GST will not be charged to it, Uttar Pradesh AAR held.

On the same issue, the Kerala HC has taken an opposite stance.

Kerala AAR’s opinion highlights the challenges of implementing GST law uniformly across states, as differing interpretations can result in varying tax obligations for the same transactions. This discrepancy emphasizes the necessity for more explicit national guidelines to promote consistency, as businesses involved in these transactions might encounter varying tax treatments.