Supreme Court to Decide if Chartered Flights are Passenger Transport or Aircraft Hire, Impacting GST ITC [Read Order]
Supreme Court to decide if chartered flights are “passenger transport” or “tangible goods” for GST ITC
![Supreme Court to Decide if Chartered Flights are Passenger Transport or Aircraft Hire, Impacting GST ITC [Read Order]](https://images.taxscan.in/h-upload/2025/08/30/2082259-supreme-court-gst-case-chartered-flights-gst.webp "Supreme Court to Decide if Chartered Flights are Passenger Transport or Aircraft Hire, Impacting GST ITC [Read Order]")
The Supreme Court of India is set to examine whether services provided through chartered aircraft fall under “Non-Scheduled Air Transport (Passenger) Service” or should be treated as “Supply of Tangible Goods for Use (STGU)”, a distinction that carries significant tax implications.
The case arises from agreements between Reliance Commercial Dealers Ltd. (RCDL) and Reliance Industries Ltd. (RIL) in 2008 and 2009, under which RCDL, holding a Non-Scheduled Operator’s Permit (NSOP) from the DGCA, provided aircraft to transport RIL’s executives and nominees on a “right of first refusal” basis.
The revenue department argued that the arrangement amounted to a charter hire of aircraft under Supply of Tangible Goods for Use (STGU) under Section 65(105)(zzzzj) of the Finance Act, 1994) and demanded service tax exceeding Rs. 42 crore for 2008–2011. The Commissioner accepted this view and confirmed tax, interest, and penalties.
On the other hand, the company argued that it was providing non-scheduled passenger air transport services under Section 65(105)(zzzo) since it did not transfer possession or control of the aircraft to RIL, and charges were based only on actual flying hours.
The two-member bench comprising S.K. Mohanty (Judicial Member) and M.M. Parthiban (Technical Member) observed that chartering the entire aircraft for specific journeys still constituted passenger transport service, not a supply of tangible goods, and quashed the tax demands and penalties.
In its final order, the tribunal pointed out that the Civil Aviation Requirements (CAR) permit issued by DGCA allowed RCDL to provide non-scheduled passenger services, either per seat or by full charter, and such operations could not be reclassified as STGU. The CESTAT ruled in favour of the Reliance Commercial Dealers Ltd.
With the matter now pending before the Supreme Court (Civil Appeal No. 9743/2025), the Court’s decision will determine whether chartered flights are to be regarded as passenger transport (enabling GST input tax credit) or as a supply of tangible goods (where ITC is blocked).
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