A landmark Australian High Court ruling released on Wednesday ruled against Qantas's pocketing $34 million in general sales tax (GST) that passengers forfeited when they did not push through with their flights.
Australia's competition watchdog, Australian Competition and Consumer Commission (ACCC), has on Thursday awarded a conditional approval to the partnership of Qantas Airways with Emirates as the former reclaims its fading glory in the global airline industry.
In a 4-1 decision, the High Court said the GST was owed by Qantas to the Australian Taxation Office (ATO) and the air carrier is not entitled to keep the amount as a windfall. In effect, the decision reversed a full Federal Court ruling that no GST incurred since no taxable supply happened due to the canceled transaction.
Qantas had argued that the government should allow it to keep the GST it collected on tickets since the air carrier did not supply a service. However, the High Court said Qantas made a taxable supply which attracted GST when it receive the fare payment regardless if the passenger used the ticket that was booked.
"Flights were sold and bookings taken on that basis that Qantas would use its best endeavors to carry the passenger and baggage. Consequently, even if the passenger did not actually travel, there was a taxable supply incurring GST liability," The Herald Sun quoted the court ruling.
Jeremy Geale, tax partner and head of legal practice of KPMG said the High Court decision was significant because of its impact on tour operators, concert and sporting promoters and other enterprises that sell non-refundable tickets. Also affected by the ruling are construction firms and other businesses that require deposits or upfront payments from clients for services.
While Qantas express disappointment with the court ruling it said the decision would have no effect on the financially challenged air carrier since it paid the $34 million to the ATO.
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