Clarification on issue of GST on Airport levies.

Circular No.: 115/34/2019-GST
Date of Circular: 11th October 2019
Relevant Sections and Rules:

• CGST Act, 2017:
  • Section 2(31): Definition of “consideration”
  • Section 168(1): Power to issue instructions
• CGST Rules, 2017:
  • Rule 33: Pure agent provisions
• Aircraft Rules, 1937:
  • Rule 88: Passenger Service Fee (PSF)
  • Rule 89: User Development Fee (UDF)
• Airports Economic Regulatory Authority of India Act, 2008:
  • Section 13(1)(b): Authority to levy UDF
• DGCA Circulars: AIC No. 5/2010, AIC Nos. 3/2018 & 4/2018

Summary of Circular:

This circular provides clarity on the GST applicability on Passenger Service Fee (PSF) and User Development Fee (UDF) collected at airports and the role of airlines as pure agents in collecting such fees.

1. Nature of PSF and UDF:

• PSF (Rule 88) and UDF (Rule 89) are levied by airport operators for providing services to embarking passengers.
• As per DGCA directions (AIC No. 5/2010), these charges are collected by airlines while issuing tickets and remitted to airport operators.
• Airlines receive a collection fee of ₹5, which is not to be passed on to passengers.

2. Taxability and Consideration:

• PSF and UDF are consideration for services rendered by airport operators, not by airlines.
• These levies are subject to GST in the hands of airport operators.
• Airlines act merely as collection agents, and not service providers for PSF/UDF.

3. Airlines as Pure Agents – Rule 33 Conditions:

For airlines to be treated as pure agents (and thus exclude PSF/UDF from their taxable value), they must:

• Act on authorization from passengers.
• Separately mention PSF/UDF and applicable GST in the invoice.
• Not hold or use the goods/services for themselves.
• Only recover the actual amount incurred on behalf of the passenger.

If these conditions are met:

• Airlines are not liable to pay GST on PSF/UDF.
• PSF/UDF charges are excluded from airline’s value of supply.
• Passengers may claim ITC on GST charged on PSF/UDF, based on the airline’s invoice.

4. Airport Operators’ Liability:

• Airport operators are required to pay GST on PSF and UDF.
• These levies are inclusive of GST, and non-payment to the government is not permissible.

5. Airline Service to Airport Operators:

• The ₹5 collection charge paid by airport operators to airlines is consideration for service.
• Airlines must charge GST on this amount.
• Airport operators can avail ITC on such GST.

Source: Circular No.: 115/34/2019-GST