New Delhi: The Supreme Courtroom on Tuesday agreed to listen to a plea by the tax division searching for to impose larger service tax on constitution flight providers utilized by Reliance Industries executives by its subsidiary, Reliance Business Sellers Ltd (RCDL).
RCDL operates constitution flights for RIL’s nominees, transporting passengers on demand based mostly on the corporate’s necessities.
A bench of justices Manoj Misra and Ujjal Bhuyan issued notices to the Reliance subsidiary and noticed that it’s going to determine the bigger authorized challenge of classification of such providers.
The courtroom directed each events to file written submissions inside two weeks.
“This is a vital challenge to think about and determine because it includes a pure query of regulation relating to interpretations and classification. Problem discover. After contemplating the above, we deem it acceptable to require the discovered counsel for the events to submit written submissions together with the related provisions of the statute, and likewise the agreements beneath which the service provide was rendered,” Misra stated.
The tax division argued that RCDL is successfully renting plane to Reliance, which ought to appeal to larger taxes like tools leases. RCDL contends it’s merely flying passengers on constitution flights, which needs to be taxed like regular air transport providers at decrease charges.
If the Supreme Courtroom guidelines in favour of the tax division, company constitution providers might grow to be considerably costlier, with firms dealing with retrospective tax calls for and better ongoing prices, making personal jet use for executives costlier.
What do the foundations say?
Beneath DGCA guidelines, non-scheduled air transport providers (passenger) contain transporting passengers, mail, or items with out a mounted timetable, working on a constitution or on-demand foundation. Operators maintain a non-scheduled operator’s allow (NSOP), permitting them to fly every time clients require, both by promoting seats individually or chartering your complete plane.
At the moment, passenger transport providers are taxed at decrease charges like regular airways (e.g. 5% beneath GST for financial system class), whereas plane leases or leasing (STGU) appeal to larger taxes (as much as 18% beneath GST) as they’re handled like renting tools.
The Commissioner of Service Tax, Mumbai approached the Supreme Courtroom in opposition to a 2 Could order of the Customs, Excise & Service Tax Appellate Tribunal (CESTAT), which had favoured Reliance and quashed tax calls for of round ₹42 crore protecting FY 2008-09 to FY 2010-11.
The difficulty arose after RCDL, in 2008, signed agreements with RIL to offer home and worldwide air transport providers for its executives, personnel, and nominees, giving RIL a ‘proper of first refusal’ to make use of sure plane. RCDL operated beneath an NSOP issued by DGCA for such passenger providers.
Nonetheless, based mostly on intelligence inputs, the tax division alleged that RCDL was basically hiring out plane on a time foundation with out paying relevant service tax beneath the ‘provide of tangible items to be used’ (STGU) class. This led to a few present trigger notices issued between 2009 and 2011.
In March 2016, the commissioner upheld these tax calls for, prompting RCDL to attraction to CESTAT Mumbai.
RCDL argued its agreements had been for passenger transport, not plane rental, and that it paid service tax beneath passenger providers till June 2010 when home flights turned taxable.
The corporate highlighted that it bore all operational prices, costs had been based mostly on precise flying hours, and no payments had been raised if flights had been cancelled as a consequence of regulatory or climate points, proving it was not a rental association.
The tax division, nonetheless, insisted that RCDL was successfully offering plane to RIL as items to be used, pointing to the ‘proper of first refusal’ clause as proof of a rental association. It additionally famous no particular person passenger tickets had been issued, not like regular air transport providers.
In its 2 Could order, CESTAT dominated in favour of RCDL, stating it held the proper permits to function as a passenger transport supplier and that RIL by no means took possession or operational management of the plane.
The tribunal concluded RCDL’s providers had been rightly categorised beneath ‘transport of passengers by air’ beneath a piece of the Finance Act, 1994, not as STGU. Part 65(105)(zzzo) of the Finance Act, 1994 taxes constitution flights as passenger transport providers.
The tribunal famous STGU tax applies solely when items are provided to be used with out giving possession or management to the consumer, which was not the case right here.
Setting apart the commissioner’s 2016 order, CESTAT quashed the tax calls for, curiosity, and penalties in full.
Aggrieved, the tax division has now moved the Supreme Courtroom, which is able to determine whether or not such company constitution flights needs to be taxed as plane leases or passenger transport – a ruling that might have important implications for company aviation.
An emailed question to Reliance Industries remained unanswered until press time.
RCDL, the air constitution arm of Reliance Industries, operates a fleet of round six enterprise jets, with a mean plane age of 6.4 years, in line with aviation knowledge web site Planespotters.web.
In accordance with Airports Authority of India knowledge, common aviation plane actions rose sharply in early 2025 – up 43.3% in January (26,890 flights) and 13.9% in February (27,360 flights). Between April 2024 and February 2025, constitution flight actions grew 19.7% to 253,000 flights.
A Denzev analysis report famous there have been 1,156 energetic enterprise jets within the Asia-Pacific by end-2024, up 1.2% year-on-year, because the area’s enterprise aviation recovered from the pandemic. India had the most important personal jet fleet in South Asia and the third largest in Asia-Pacific, with over 151 registered personal jets in 2023.
Main Indian constitution suppliers embrace Poonawalla Aviation, Taj Air, JetSetGo, Hype Luxurious, BookMyCharters, and Membership One Air, providing luxurious personal flying choices.
The price of proudly owning a personal jet ranges from round ₹16 crore for mild jets just like the Cirrus Imaginative and prescient to over ₹550 crore for long-range jets just like the Gulfstream G650.