Delhi HC shields IndiGo from Rs.458-cr GST over engine compensation dispute
The Delhi High Court on Friday protected InterGlobe Aviation, which operates India’s largest airline IndiGo, from coercive action over a Rs.458.26 crore goods and services tax (GST) demand linked to compensation received from a foreign engine supplier.
A division bench of Justices Nitin Wasudeo Sambre and Ajay Digpaul issued notice to the GST department and granted interim protection to the airline after observing that, prima facie, the amount received by IndiGo appeared to be a “compensation”, and not “supply”.
IndiGo argued before the court that there was no risk to revenue and no need for coercive recovery because the airline was financially sound.
“I am not going to run away… I pay more than Rs.20,000 crores in a year,” remarked V. Lakshmikumaran, IndiGo's counsel, while addressing concerns over safeguarding revenue. “Therefore, the question of safeguarding the revenue—no problem, no issue at all. I am solvent,” he added.
Queries sent to IndiGo seeking comments on the matter remained unanswered till press time.
The dispute relates to a tax order issued under Section 74 of the CGST Act for the period FY2018-19 to FY2022-23. Tax authorities argued that goods and services tax (GST) was payable on compensation received by IndiGo and also questioned certain input tax credit (ITC) claims.
The case goes back to 2018-19 and 2019-20 when engine defects forced IndiGo to ground some aircraft for safety reasons. With aircraft unable to fly, the airline lost flying hours and suffered business losses.
To make up for these losses, the foreign engine supplier entered into an arrangement with IndiGo and issued credit notes worth around Rs.2,000 crore. In simple terms, these credit notes worked like compensation for the airline’s losses caused by grounded aircraft.
