More Stories

Informist, Friday, May 22, 2026

 

--HC stays CGST dept's INR 9.17 bln demand, fine against InterGlobe Aviation 

--HC notice to CGST dept on InterGlobe Aviation plea against demand, fine 

 

NEW DELHI – The Delhi High Court Friday stayed the Central Goods and Service Tax department's INR 9.17-billion demand and penalty against InterGlobe Aviation Ltd., the parent company of IndiGo airlines, for financial years (Apr-Mar) 2018-19 to FY23. The high court has issued a notice to the tax department on InterGlobe Aviation's plea challenging the tax demand and penalty on compensation received by the company from foreign suppliers and denial of input tax credit.

 

The high court observed that prima facie, the amount received towards compensation by InterGlobe Aviation couldn't be termed as supply under the Central and Goods Services Tax, 2017, and related GST circulars. It will hear InterGlobe Aviation's case next in August. 

 

The petitioner said that it imported aircraft and engines and had paid integrated goods and services tax on it. Thereafter, some engines malfunctioned and the company had to ground the aircraft, InterGlobe Aviation said. Due to loss of business, InterGlobe Aviation had signed an agreement with a foreign company to get credit notes worth around INR 20 billion to compensate the airline for loss of flying hours and business. 

 

The tax department said that the credit received by InterGlobe Aviation would amount to service under the reverse charge mechanism under the 2017 Act, and consequently taxes should be paid on the same. InterGlobe Aviation, by accepting the compensation, had agreed to "tolerate" the supplier's failure to meet performance benchmarks, said the tax department. 

 

Challenging the demand and penalty passed by the tax department, InterGlobe Aviation moved the high court. InterGlobe Aviation said that the tax department's demand and penalty order was without jurisdiction and sought that no coercive steps should be taken against the company as it was not a fly-by-night operator and a solvent company.

 

InterGlobe Aviation said that according to a Central Board of Indirect Taxes and Customs circular of 2022, there must be an express or implied agreement to do something, abstain from doing something, or tolerate an act in return for payment before such payment can be treated as consideration for a taxable supply. Mere flow of money from one party to another cannot by itself create a taxable supply, said InterGlobe Aviation. Payments such as liquidated damages for breach of contract are not payments for tolerating a breach, but compensation for loss caused by non-performance, it added.

 

The tax department had issued a demand against InterGlobe Aviation under Section 74 of the 2017 Act. This section governs the recovery of GST when tax is unpaid, short-paid, or input tax credit is wrongly claimed due to fraud, wilful misstatement, or suppression of facts to evade tax. 

 

At 1436 IST, shares of InterGlobe Aviation Ltd. were up 1.1% at INR 4,453.00 on the National Stock Exchange.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Surya Tripathi

Edited by Avishek Dutta

 

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

 

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd. by NSE Data & Analytics Ltd., a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt. Ltd.

 

Informist Media Tel +91 (11) 4220-1000

Send comments to feedback@informistmedia.com

 

© Informist Media Pvt. Ltd. 2026. All rights reserved.