Renting of aircraft, Goods and Services Tax - GST

[Amisha Aggarwal]

What would be the GST implications on renting of aircraft? What would be the place of supply for renting of aircraft? What would be the nature of services?

Posts / Replies

[Sadanand Bulbule]

Leasing/renting of Aircraft under HSN 9973 attracts 5% GST as classified under Entry 5(f) of II Schedule to the CGST Act.

Place of supply is the actual place of rent/lease attracting CGST & SGST on intra-state supply, irrespective of its flying destination.

[Sadanand Bulbule]

 HSN 9973 stands for "Leasing or rental services with or without operator'.

[Amisha Aggarwal]

Thank you for the response. If I am a supplier located in Delhi, and the recipient of the service is based in Gujarat. The service involves renting an aircraft that is located in Australia. What would be the place of supply in this case? Will this transaction be treated as an export of service?

[YAGAY andSUN]

In this case, you’re renting an aircraft located in Australia to a recipient in Gujarat while you (the supplier) are based in Delhi. Given the nature of your inquiry, let’s break down the GST implications, including place of supply, the nature of the service, and whether the transaction is considered an export of service:

1. GST Implications on Renting of Aircraft:

As per the GST Act, the renting or leasing of an aircraft falls under HSN Code 9973, which refers to "Leasing or rental services with or without operator." These services attract 5% GST as per Entry 5(f) of the II Schedule of the CGST Act.

2. Place of Supply (for renting of aircraft):

The place of supply of a service is crucial in determining the tax jurisdiction (CGST/SGST or IGST). For the renting of aircraft, Place of Supply is determined as follows:

• Under Section 12(2) of the IGST Act, the place of supply for services relating to transportation of goods or passengers is the location where the service is actually performed, i.e., the location where the aircraft is leased/rented to the recipient.

• In this case, the aircraft is located in Australia, but the recipient (the one renting the aircraft) is in Gujarat.

Key Points:

• The location of the aircraft (Australia) plays a crucial role in determining whether the service qualifies as an export.

• The location of the recipient (Gujarat, India) influences whether the supply is intra-state or inter-state for GST purposes.

3. Is this Transaction an Export of Service?

For a transaction to be considered an export of service under Section 2(6) of the IGST Act, the following conditions must be satisfied:

1. The supplier of the service must be located in India: In your case, the supplier is based in Delhi, so this condition is met.

2. The recipient of the service must be located outside India: The recipient is based in Gujarat, which is in India, so this condition is not met.

3. The place of supply of the service must be outside India: The place of supply in this case is related to the location of the aircraft, which is in Australia. However, since the recipient is in India, this condition is not met.

Thus, the service does not qualify as an export of service, as the recipient is located in India. For GST purposes, the place of supply would still be treated as India because the recipient is based in Gujarat.

4. Place of Supply in this Scenario:

• Location of Supplier: Delhi, India.

• Location of Recipient: Gujarat, India.

• Location of Aircraft: Australia (irrelevant for intra-state/inter-state supply but important for determining export status).

Because the recipient is in India, the place of supply will be India. Since the aircraft is located outside India, this would still be treated as an inter-state supply for GST purposes.

5. Applicability of GST in this Scenario:

• The renting of the aircraft is a service classified under HSN 9973 and attracts 5% GST as per the applicable schedule.

• The GST charge will depend on the place of supply:

  • If the service is intra-state, CGST and SGST will be applicable.

  • If the service is inter-state, IGST will be applicable.

Since the recipient is in Gujarat (a different state from Delhi), this will be treated as an inter-state supply of services. Therefore, IGST will be applicable at the rate of 5%.

Summary of GST Implications:

Point	Details
GST on Aircraft Renting	5% GST under HSN Code 9973 for "Leasing or rental services with or without operator."
Place of Supply	Location of recipient (i.e., Gujarat) will determine the place of supply.
Type of Supply	Inter-state supply (due to the recipient being in Gujarat while the supplier is in Delhi).
GST Applicability	Since the supply is inter-state, IGST will apply at 5%.
Export of Service	Not an export (as the recipient is in India).

Conclusion:

In your case, since the recipient is located in India (Gujarat) and the aircraft is located in Australia, the supply will be treated as inter-state for GST purposes, and IGST at 5% will be applicable. The transaction will not qualify as an export of service, as the recipient is located within India.

[Sadanand Bulbule]

Plz refer the following entry of III Schedule, which is neither a supply of goods nor services under the CGST Act

7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India.

However make sure who actually is the recipient of services of Aircraft being in Australia. In case the services of the said aircraft are not uitlised in India, then above entry clearly applies-non taxable. Meaning the aircraft is used utilised outside India only. Mere rental agreement between Delhi and Gujarat parties does not decide the nature of supply, much less taxable. Further it is not export of services, the aircraft being in Australia.

[Amisha Aggarwal]

What would be place of supplies in different scenarios

1. Supplier(Delhi)  Recipient (Australia)  Aircraft(Australia)
2. Supplier(Delhi)  Recipient (Australia)  Aircraft(Delhi or Gujrat)
3.  Supplier(Delhi)  Recipient(Delhi) Aircraft (Gujrat)
4. Supplier(Delhi)  Recipient(Gujrat) Aircraft (Delhi)

[Sadanand Bulbule]

Instead of going for hypothetical questions, it is paramount to decide whether the Aircraft based in Australia would be used to fly in India or not by the lessee of Gujarat? It is as simple as that. The answer lies in the question itself. Already I have made it clear.