New service tax will clip frequent fliers' wings

Flying is all set to get dearer by at least 10-15 %. A service tax of 10.36% will now be levied on domestic flights and economy class of foreign ones. Four years ago, this tax was imposed only on premium classes of international flights.
The government hopes to rake in an extra Rs 500 crore through this charge even as air travellers feel the pinch. For instance, a Mumbai-Delhi economy class return ticket will cost Rs 800-1 ,000 more depending on the seasonal fares. For international passengers , the hike would be much higher. Tickets to southeast Asia, for instance, will go up by at least Rs 2,000 for a round trip. Airlines say they are still unclear whether the 10.36% charge would be levied on just the base fare or the total of all levies like fuel surcharge and airport user fees.
Apart from service tax, what will further push air fares is the fact that the 5% increase in customs duty will raise aviation turbine fuel prices by anywhere around Rs 1,500 per kilo litre. Airlines will pass on the extra cost to passengers by hiking fares.
GMR (airport) CFO Sidharth Kapur called the levy ‘‘ bad news’ ’ as it could hit traffic. SpiceJet CEO Sanjay Aggarwal said the new levy didn’t mean an ‘‘ unnecessary burden’ ’ for fliers. ‘‘ The new tax rates offering relief to 60% of taxpayers and the various taxation proposals will put more money into hands of the consumers. We believe this will favorably impact overall consumption as well as demand for aviation ,’’ he said.
27/02/10 Economic Times

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Categories: Indian Aviation- In General Feb 2010