The Supreme Court of India dismissed an appeal by the Customs Department seeking to impose Integrated Goods and Services Tax (IGST) on aircraft and spare parts re-imported by Indian airlines after overseas repairs. The decision has come as a major relief to carriers such as IndiGo and SpiceJet.

A Bench comprising Justices B.V. Nagarathna and K.V. Viswanathan declined to admit the appeal challenging an August 2024 ruling by the Customs, Excise and Service Tax Appellate Tribunal (CESTAT), which had held that retrospective levy of IGST was not permissible. The tribunal had concluded that such a demand would place an undue burden on the aviation industry and lacked legal justification.

The matter originated from Notification No. 45/2017-Customs, issued just before the implementation of GST on July 1, 2017. This notification exempted IGST on re-imported aircraft parts, limiting tax liability to basic customs duty calculated on the cost of repairs, freight, and insurance. Relying on this, airlines continued to clear re-imports without paying IGST.

However, starting in August 2017, customs authorities began issuing tax demands, asserting that under the GST regime, the term “customs duty” also included IGST. These claims were challenged before CESTAT, which in November 2020 ruled that IGST could not be imposed since the 2017 notification did not expressly include it. That decision was appealed by the government and remains pending before the apex court.

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In the meantime, the Centre issued Notification No. 36/2021-Customs on July 19, 2021, amending the original 2017 notification to include IGST and compensation cess on re-imported goods. Though termed a clarification, the amendment was applied retrospectively from July 1, 2017, to July 18, 2021, prompting further litigation from the affected airlines.

On August 5, 2024, CESTAT again ruled in favour of the airlines, stating that retrospective application of the 2021 amendment could not be justified. This verdict led to the Customs Department’s appeal before the Supreme Court, which was rejected on Monday.

During arguments, Additional Solicitor General N. Venkataraman urged the court to consider the appeal, noting that nearly ₹100 crore was at stake and that the interpretation of the 2017 exemption remained unsettled. However, the court was unconvinced. “You cannot enforce a retrospective levy through clarification,” the bench remarked while refusing to entertain the appeal.

The dispute relates to around 1,800 re-import cases involving aircraft and component parts. As of July 2024, a uniform 5% IGST is levied on such imports as part of a broader push to support the aviation and maintenance, repair, and overhaul (MRO) sectors.

Separately, the Delhi High Court had on March 4, 2025, struck down portions of the 2021 notification imposing IGST and cess on re-imported repair charges, declaring them unconstitutional. That ruling remains unchallenged by the government.

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