Airlines may have to absorb tax for tickets sold before notification

New Delhi: Airlines may have to absorb a 10% service tax on tickets booked before the finance ministry notifies the levy proposed in the 26 February Union Budget, analysts said.
The notification is expected sometime in May after the Budget is passed by Parliament and the carriers may not be able to charge passengers the amount on tickets bought before then for travel at a later date.
“Airlines will not be able to recover the service tax amount from the passengers prior to the levy being made effective. Ideally, the government should make service tax leviable only on tickets sold by airlines for travel from the effective date,” said Kapil Arora, partner, Ernst and Young. “This is what happened in the past when the tax was introduced on premium-class international air travel.”
Some service taxes such as those on rail freight have been notified already while levies such as those on air travel will come into affect only when the Bill is cleared, said a finance ministry official who asked not to be identified.
The carriers have until June to convince the finance ministry not to impose the tax and a delegation of airline executives is likely to make a presentation to finance secretary Ashok Chawla next month, said Anil Baijal, former joint secretary at the aviation ministry and now secretary general for lobby group Federation of Indian Airlines.
01/04/10 Tarun Shukla/Live Mint

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Categories: Indian Aviation- In General Apr 2010