The Delhi High Court on Friday protected InterGlobe Aviation, the owner of IndiGo Airlines, from coercive action in connection with a Goods and Services Tax (GST) demand of around ₹458 crore [Interglobe Aviation Vs Additional Commissioner CGST].
A Division Bench of Justices Nitin Wasudeo Sambre and Ajay Digpaul passed the interim order after observing that, prima facie, the amount received by IndiGo appeared to be 'compensation' and could not be termed as 'supply'.
The case concerns whether compensation received by IndiGo from a foreign aircraft engine supplier for engine malfunction and grounding of aircraft can be treated as a taxable service under GST law.
The airline moved the High Court against a demand of about ₹458 crore and an equivalent penalty. It argued that the tax order was without jurisdiction since the amount received by it was compensation for loss of business and not consideration for any supply of goods or services.
Appearing for IndiGo, advocate V Lakhsmikumaran, told the Court that the airline had imported aircraft along with engines and had paid Integrated GST at the time of import.
However, during 2018-19 and 2019-20, some engines malfunctioned, forcing the airline to ground aircraft for safety reasons.
As a result, a supplementary agreement was entered into between IndiGo and the foreign supplier. Under this arrangement, the supplier issued credit notes worth around ₹2,000 crore to compensate the airline for loss of flying hours and business.
The tax department, however, treated this compensation as consideration for a service allegedly provided by IndiGo. According to the department, by accepting the compensation, IndiGo had agreed to “tolerate” the supplier’s failure to meet performance benchmarks. On this basis, the department demanded GST under the reverse charge mechanism.
IndiGo disputed this finding and relied on Section 7 of the Central Goods and Services Tax Act, which defines “supply”. It also placed reliance on a Central Board of Indirect Taxes and Customs (CBIC) circular dated August 3, 2022.
22/05/2026 S N Thyagarajan/Bar and Bench
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