The Kerala bench of the GST Authority for Advance Ruling (AAR) ruled that the concessionaire agreement between the AAI (Airport Authority of India) and Adani Thiruvananthapuram International Airport Ltd is liable to GST since it is not a “transfer of business” but supply of services.
This ruling is in direct conflict with rulings passed by the Appellate Authority for Advance Ruling (AAAR) in Rajasthan and Gujarat regarding the transfers of Jaipur and Ahmedabad airports, respectively. These state bodies exempted GST on almost identical transfers.
Back in March 2023, the Rajasthan bench of AAR said that the considerations received from the transfer of running business of whole airport operations are a “tax neutral supply”, which could persuade similar transfers in other locations in India. However, the almost identical agreement between Adani’s airport arm and AAI is now treated differently.
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The 2021 handover of the Thiruvananthapuram airport was met with strong political opposition from both the ruling left LDF and opposing UDF alliances. However, it garnered local support in Thiruvananthapuram when social media groups, including IT professionals and residents, actively lobbied for better amenities, which, according to them, were allegedly absent in the capital city airport when compared to the PPP facilities at Cochin International Airport.
According to GST law, the transfer of a business as a going concern, as a whole or an independent part thereof, is considered a service, and such supplies are exempt from the goods and services tax. The Rajasthan AAR ruled in 2023 that the 2021 Jaipur Airport pact was a transfer of going concern and, therefore, GST exempt.
Did Thiruvananthapuram get the short end of the stick?
In 2021 and 2022, both Gujarat and Uttar Pradesh benches of AAR also ruled that business arrangements between AAI and airport proceeds in a similar manner were covered under transfer of going concern.
However, the invoice raised by AAI for reimbursement of salary and staff cost on Adani Jaipur International Airport Ltd fell under “supply of services” and hence taxable at 18% under GST, as per the Rajasthan AAR ruling.
In contrast, the Kerala ruling for Thiruvananthapuram International Airport by the state AAR said that the deal did not constitute “a transfer of business” and, therefore, will not be treated as “a transfer as going concern”. It also noted that “assets have not been transferred”, and GST is payable on the amounts received as a consideration for leasing or supply of assets to the concessionaire, that is, Adani Thiruvananthapuram International Airport Ltd. These leased assets include critical aeronautical items required to operate the airport.
The Kerala AAR bench went even further and slapped GST on the annual concession fees charged by AAI from Thiruvananthapuram International Airport Ltd as well.
Will the Kerala GST ruling hamper the development of Thiruvananthapuram International Airport?
Last month, Adani Airport Holdings Ltd (AAHL) announced a Rs 1,300 crore investment into the expansion of Thiruvananthapuram International Airport under the name “Project Anantha”.
With an aim to do a significant overhaul of the infrastructure by 2027, the expansion includes an extended renewal of the terminal, with a focus on Kerala’s culture and heritage. It remains to be seen what will happen to the plan now that there are tax implications in the mix.
AMRG & Associates Senior Partner Rajat Mohan noted Kerala AAR’s contrasting stance, saying, “this discrepancy highlights the need for clearer guidance at a national level to ensure uniformity, as businesses navigating such transactions could face inconsistent tax treatment.” The only similarity with the GST body’s treatment of the identical Jaipur deal was the 18 per cent GST levied on the invoices raised by AAI for reimbursement of salary and staff cost since they come under “supply of services”.
