Kerala AAR Takes Contrasting Stance On AAI-Adani Thiruvananthapuram Concessionaire Pact, Experts Say

The Kerala bench of GST Authority for Advance Ruling took a contrarian stance on the concessionaire agreement between the AAI and Adani Thiruvananthapuram International Airport Ltd., finding it liable to pay Goods and Services Tax.

AMRG & Associates Senior Partner Rajat Mohan said the Kerala AAR has taken a contrasting stance on the issue.

"The Kerala AAR's view underscores the complexity of applying GST law consistently across states, as varying interpretations can lead to differing tax liabilities for similar transactions. This discrepancy highlights the need for clearer guidance at a national level to ensure uniformity, as businesses navigating such transactions could face inconsistent tax treatment," Mohan said.

The ruling stands different from the ones seen in Rajasthan, Gujarat and Uttar Pradesh.

The Appellate Authority for Advance Ruling in Rajasthan and Gujarat had upheld AAR decisions stating that transfers of airports, such as Jaipur and Ahmedabad, qualifies as 'going concern' transfers, and would, therefore, be exempt from GST.

Similarly, the Uttar Pradesh AAR ruled that the transfer of Chaudhary Charan Singh International Airport in Lucknow to Adani Lucknow International Airport Ltd. is also a 'going concern' and GST will not be levied on it.

Airports Authority of India submitted before the AAR that it has entered into a concessionaire agreement with Adani Thiruvananthapuram International Airport Ltd. for the operation, management, and development of the airport for 50 years.

The state-run airport operator sought rulings from the AAR on a set of queries, including whether the agreement involves transfer of business and whether such a transfer would be treated as 'supply as going concern' and be exempt from GST.

The Kerala AAR ruled that the AAI-Adani agreement does not constitute 'transfer of business' by the applicant to the concessionaire, and cannot be treated as 'transfer as going concern'.

The concessionaire is supplying the service of developing the airport of the applicant who is providing manpower, leasing, etc., to the concessionaire and both constitute supply under Section 7 of the GST Act, the AAR said in a ruling dated Jan. 10.

On whether GST is leviable on transfer of existing assets, aeronautical or non-aeronautical assets and capital work in progress by AAI to Adani Thiruvananthapuram International Airport Ltd., the AAR said that the "assets have not been transferred" and GST is payable on the amounts received as a consideration for leasing or supply of the assets to the concessionaire.

The authority also said GST will be levied on the annual concession fees charged by the applicant from the concessionaire. Also, 18% GST can be levied on the invoices raised by the applicant for reimbursement of staff cost of the concessionaire.

(With PTI inputs)

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