FinMin may review service tax on air travel

New Delhi: The finance ministry is reviewing the levy of service tax on air travel. In the coming Budget, it may consider either doing away with the tax or removing the upper limit.
In July last year, the ministry had put a cap on service tax in case of domestic flights at 10 per cent of the gross value of the ticket, or Rs 100 per travel, whichever is less, and on international travel by economy class at 10 per cent of the gross value of the ticket, or Rs 500, whichever is less. A finance ministry official said since the service tax was capped at Rs 100 for domestic and Rs 500 for international travel, in many cases, the credit of tax paid on inputs used to provide services was more than the service tax paid by the airline.
“Input tax credit is not given when an item is exempted from service tax. But by paying a nominal amount as service tax, airlines can claim tax credit, which is sometimes huge. So, either the service tax should go or the cap removed,” the official told Business Standard.
15/02/11 Vrishti Beniwal/Business Standard

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Categories: Indian Aviation- In General Feb 2011