In a recent ruling, the Kerala Authority for Advance Rulings (AAR) held that GST is applicable on the leasing and concession fees in the concession agreement between Airports Authority of India (AAI) and Adani Thiruvananthapuram International Airport Ltd. The applicant, the Airports Authority of India applied to seek clarification on whether the transfer of operational control of Thiruvananthapuram Airport to Adani could be treated as a “transfer of business” under Section 7 of the Central Goods and Services Tax Act (CGST Act), which might exempt the transaction from GST. Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here

The AAI, represented by Chartered Accountant Hem Mahesh Chhajed submitted various questions related to the GST applicability on various fees and services, including the concession fees, leasing of airport facilities, and reimbursement of municipal taxes and staff costs paid by Adani under the agreement. The AAR bench members comprising Gayathri P.G., IRS, and Abdul Latheef observed that the concession agreement did not constitute a “transfer of business” or “transfer as a going concern”.

The ruling noted that even though operational control was handed over, AAI retained ownership of important airport assets which remained in AAI’s books. So, the AAR ruled that the arrangement was an operating lease and not a transfer of business. Complete Supreme Court Judgment on GST from 2017 to 2024 with Free E-Book Access, Click here The AAR ruled that GST is applicable on the monthly/annual concession fees and other leasing charges under Section 7 of the CGST Act categorizing them as taxable supplies.

AAR ruled that GST was applicable at 9% CGST and 9% SGST or 18% IGST on invoices raised by the Airports Authority of India for reimbursement of salary and staff costs to Adani under SAC 998519. The AAR held that the reimbursement of municipal taxes and property taxes does not attract GST, provided these are direct reimbursements without any added value. The AAR viewed this lease as not classified as an independent business transfer but rather a service agreement governed by GST provisions.