The High Court has ruled against Qantas in a landmark case seen as a key test of the Goods and Services Tax.

In a majority decision, the court ruled Qantas must pay GST to the Tax Commissioner on fares received, whether or not the passenger actually took the flight.

Qantas and Jetstar wanted to get back from the Australian Tax Office $34 million in GST that had been collected from customers who did not take flights they had booked.

The airline had argued it did not supply a service and therefore should not have to pay the tax.

However, the High Court found that Qantas and Jetstar's contracts with their passengers did not provide an unconditional promise to carry passengers or their baggage on a particular flight.

"They supplied something less than that. This was at least a promise to use best endeavours to carry the passenger and baggage, having regard to the circumstances of the business operations of the airline," the majority judgment of justices Gummow, Hayne, Kiefel and Bell stated.

"This was a "taxable supply" for which the consideration, being the fare, was received."

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Therefore, the promise was a service subject to the GST.

One judge, Justice Dyson Heydon, found in favour of Qantas, but even he acknowledged a victory for the airline would have resulted in customers having paid money to it that they were told would go to the ATO.

"The respondent [Qantas] seeks to acquire money paid by passengers who intended or expected that it would end up in the hands of the appellant [the ATO], not those of the respondent," he observed.

"If the respondent's argument is correct, the passengers who have not claimed their fares back have left the respondent in a position to gain money which it was never meant to have."

In a statement, Qantas said it was disappointed with the court's decision but said the ruling would not affect the company's bottom line because the GST had already been paid to the tax office.

Package deal

The court ruling comes on the same day Qantas and Australia Post announced they would be splitting their freight joint ventures.

Qantas chief Alan Joyce says the deal brings a $30 million windfall.

"That will be primarily focused at reducing our debt position," he said.

Qantas will take over Australian Air Express and Australia Post will control Star Track.

Qantas shares were up 2.5 per cent at $1.22 following news of the deal