Centre makes clear that service tax criteria to apply for non-stop, stopover flights
In a major relief to airlines, the Centre on Friday made clear that the principles applied to tax international air travel would remain unchanged under the Goods and Services Tax (GST) regime set to roll out on July 1.
The clarification comes in the wake of concerns raised by domestic carriers, and flagged by the Civil Aviation Ministry, that non-stop flights were likely to become more expensive than flights with stopovers given some ambiguous wording in the norms relating to GST.
Airlines feared that passengers planning to travel say Delhi-New York non-stop could opt to fly with Gulf carriers if they found the post-tax fares for a Delhi-Dubai-New York ticket to be more attractive on account of GST being levied only on the first leg of the overseas flight.
“It was clarified today that the new GST rates will apply based on old criteria on international tickets,” a senior Civil Aviation Ministry official said following a stakeholders’ meeting chaired by Minister of State for Civil Aviation Jayant Sinha. The same rules prevalent under service tax would continue to apply under GST, the official added.
“This is a big relief to full service airlines, especially Jet Airways and Air India, which operate non-stop long-haul journey flights,” said an airline representative, who did not wish to be identified. “Officials from the Central Board of Excise and Customs, who were present in the meeting, clarified that same taxation principles will apply under the GST.”
The Civil Aviation Ministry had, earlier this month, taken up the matter with the Finance Ministry after Jet Airways, Air India, and the International Air Transport Association (IATA) had raised concerns about the tax treatment on international tickets.
Under GST, economy class tickets would attract 5% tax, while travel in business class would be taxed at 12%.
In the meeting held on Friday, domestic airlines said that they would implement GST from July 1.
The aviation industry “is prepared for July 1,” Mr. Sinha tweeted after the meeting.