Saturday, May 20, 2017

Economy class air travel to attract 5% GST; business class 12%

New Delhi: The growing aviation sector of India will get a boost once Goods and Service Tax (GST) is implemented as the tax rate on air travel would be 5 per cent, Finance Minister Arun Jaitley said on Friday.
This is lower than the prevailing rate as currently air travel attracts tax rate of 6 per cent and 9 per cent for economy and non-economy travel respectively.
“Considering that it is an essential mode of transport, taxation on airline services and railways has been kept at the minimum bracket of 5 per cent,” Jaitley said in a press conference in Srinagar.
The components of service sector were broadly divided into four brackets of 5 per cent, 12 per cent, 18 per cent and 28 per cent.
Another reason for keeping taxation rate on transport services in the lower bracket is because unlike other sectors the players in this sector will not get input credit on taxes. This is due to petroleum (aviation turbine fuel) for airlines being kept out the GST regime.
Civil Aviation Minister Ashok Gajapathi Raju earlier wrote to the finance ministry suggesting ways to compensate airlines that will not be able to take input tax credit on aviation turbine fuel under GST.
19/05/17 Arindam Majumdar/Business Standard