Relief For Delhi International Airport Limited: Tribunal Quashes Rs 262-Crore Service Tax Demand

The Delhi bench of the Service Tax Tribunal has squashed a Rs 262-crore service tax demand on Delhi International Airport Limited (DIAL) for collecting user development fee (UDF) from airline passengers, reports Financial Express (FE).

In its order, the Tribunal noted that since the airport levied the fee for future development of infrastructure and not for any existing services, no tax can be charged on the same.

The facilities at the Indira Gandhi International Airport “were available without any additional charge before the imposition of development fee and continue to be available after its quashing,” the court added. The tribunal also cited a Supreme Court order “which makes it abundantly clear that development fee is a levy for a future establishment.”

This ruling comes as a big relief for private airport operators across the country which levy UDF under Rule 89 of Aircraft Rules, 1937.

UDF highest at Delhi Airport

While Delhi airport charges the highest amount of UDF on domestic passengers, UDF for international travellers is highest in Hyderabad. Also, Delhi is the only airport that collects UDF for both arriving and departing passengers. All other airports like Mumbai, Bengaluru and Hyderabad collect UDF only for departing passengers.

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