Adani is to pay 18% GST on staff cost dues to AAI, but nothing for the Jaipur airport business transfer

The Authority for Advance Ruling has exempted the transfer of Jaipur international airport operations from Goods and Services Tax (GST) following its takeover by the Adani group from the Airports Authority of India (AAI).

The AAI had sought a ruling from the Rajasthan bench of the Authority for Advance Ruling (AAR) to clarify. It is possible to consider the transfer of the business to M/s Adani Jaipur International Airport Ltd as a supply as a ‘going concern’, and the transfer of assets would be subject to GST.

AAI

As per GST law, supplies where the transfer of a business is a going concern, either in its entirety or in separate parts, are regarded as a service and are exempt from the goods and services tax.

The Rajasthan bench of the Authority for Advance Rulings (AAR) declared on March 20, 2023, that the concession agreement signed on January 16, 2021, between the Airports Authority of India (AAI) and M/s Adani Jaipur International Airport represents a transfer of going concerned.

Last October, the Adani Group took over the Jaipur International Airport’s operations, management, and development from the AAI. The Indian government had leased the airport to the conglomerate for a period of 50 years.

The AAR Rajasthan bench also observed that AAR’s Gujarat and Uttar Pradesh benches had similarly ruled in 2021 and 2022 that AAI’s business arrangements with Special Purpose Vehicles (SPVs) fall under the category of transfer of going concerned.

However, AAI’s invoice for staff costs or salaries reimbursement to M/s Adani Jaipur International Airport Ltd represents a supply that falls under the purview of manpower services and is therefore subject to 18% GST.

According to Rajat Mohan, a Senior Partner at AMRG & Associates, the AAR’s decision confirms that receiving considerations from transferring the entire airport’s running business by AAI is a tax-neutral supply. “This decision will serve as strong persuasive authority for any other comparable transfers by AAI in other parts of India,” Mohan added.

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