The Supreme Court on Monday agreed to examine a dispute between the customs department and InterGlobe Aviation Ltd., which operates India’s largest airline IndiGo, over whether Integrated Goods and Services Tax (IGST) should be levied on the repair costs of goods re-imported into India after being sent abroad for maintenance.
A bench of Justices B.V. Nagarathna and R. Mahadevan issued a notice to IndiGo after hearing the custom department’s plea.
The case reached the apex court after the customs department challenged a March ruling by the Delhi High Court that struck down as unconstitutional a portion of a 2021 customs notification requiring payment of IGST and cess on such re-imported goods.
Additional solicitor general N. Venkataraman, appearing for the customs department, said, “An important constitutional question has arisen in this matter. The judgement hurts us—it declares the law unconstitutional and affects every re-import.”
Lawyers representing IndiGo, however, told the court that the airline was still awaiting refunds from the department despite the high court’s order and that officials had refused to comply with the ruling. “Our refunds are all getting stuck now. They are refusing to abide by the [high] court’s order,” they argued.
Queries emailed to Indigo remained unanswered at the time of publishing this report.
Case history
The Delhi High Court’s March judgement brought major relief to airlines. It was in response to a 2023 petition filed by InterGlobe Aviation, which challenged the imposition of IGST on re-imported aircraft and parts following repairs overseas. IndiGo had argued that since aircraft engines and parts sent abroad for repair remained its property, their temporary export constituted a supply of services and not goods. Therefore, re-importing them after repairs should not attract additional tax.
The high court upheld IndiGo’s contention, ruling that IGST on imported services could be levied only under Section 5(1) of the IGST Act, not through customs notifications. It clarified that re-importing repaired goods amounted to an import of services, not goods, and therefore could not be taxed under the Customs Tariff Act.
Rejecting the government’s argument that the 2021 amendments were mere clarifications, the court said they had in fact expanded the tax’s scope unlawfully. In a 25 January 2023 interim order, the court directed IndiGo to pay IGST provisionally. After the final ruling, the airline became entitled to a refund of the taxes.
Evolution of IGST on re-imported goods
Pre-GST (before 2017): Under Notification No. 94/96-Customs (issued on 16 December 1996), customs duty on goods sent abroad for repairs was levied only on the repair cost, insurance, and freight—ensuring no double taxation.
Post-GST (2017 onwards): After GST was rolled out on 1 July 2017, the government issued a new notification continuing the earlier treatment, levying IGST and cess only on the repair cost, insurance and freight, not on the total value of goods.
However, ambiguities persisted regarding IGST’s applicability on re-imported goods. To address this, the Central Board of Indirect Taxes and Customs (CBIC) issued a circular on 19 July 2021, reiterating that IGST should apply only on the repair cost, insurance, and freight components.
This is not the first time the judiciary has intervened in IGST disputes. In 2022 the Supreme Court issued a landmark ruling that struck down the IGST levy on importers for ocean freight services provided by foreign shipping lines to foreign suppliers under cost, insurance and freight (CIF) contracts, holding that the tax mechanism violated the principles of the GST law.
