The Gujarat Authority for Advance Ruling has mandated Airbus to register for goods and services tax in Gujarat for the supply of 40 aircraft, highlighting the state’s tax jurisdiction over the manufacturing process in India and potential implications for similar contract structures.
The Gujarat Authority for Advance Ruling has said Airbus must register for goods and services tax in Gujarat for the supply of 40 aircraft to the Defence Ministry, concluding that the taxable supply is being made from the state and does not qualify for any broad government exemption. The ruling, pronounced on September 11, centres on the Indian portion of Airbus’s C-295 programme, under which aircraft assembled in Vadodara will ultimately be supplied to the Ministry of Defence.
According to the ruling, the project office is liable to pay GST in India on the 40 aircraft delivered under the platform contract. The authority noted that the manufacture and outward supply are both taking place in Gujarat, and that the value of the transaction is far above the state registration threshold of Rs 20 lakh. It also said the fact that the buyer is the central government does not, on its own, make the supply exempt.
The case forms part of a larger order for 56 C-295 military transport aircraft placed in 2021. Business Standard reported previously that the Gujarat AAR viewed the arrangement as a composite supply, with the aircraft and related support services naturally bundled and taxable at 5% GST. Under the programme, the first 16 aircraft are being delivered in fly-away condition from Spain, while the remaining 40 are being manufactured in India by Tata Advanced Systems, which has set up the final assembly line in Vadodara.
Tax specialists said the ruling could matter well beyond this one defence deal. Amit Maheshwari of AKM Global told the publication that the authority focused on the actual contractual flow rather than simply asking who built the aircraft. He said the fact that title passed to Airbus in Vadodara, before the aircraft were supplied to the ministry, was central to the GST analysis. He added that the decision may be relevant to other contract-manufacturing structures in which production and final supply are split between different entities.
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