Friday, August 05, 2016

GST could make air tickets costlier

The passage of Goods and Services Tax (GST) bill in the upper house of Parliament has brought a cheer to many industries. However, airlines in the country are afraid that their costs will rise because of this tax, which would eventually lead to higher ticket prices, impacting customers' pockets and airlines' cash flow.

The bill will bring in the single- biggest tax reform that India has seen since 1947, replacing various tax structures and following the principle of one country, one tax.
Senior executives and industry experts have told ET that air travel would likely have a double negative impact on air travel. While it will make tickets expensive since GST on tickets is higher than the current service tax, jet fuel is also not covered under GST, meaning that airlines will not be able to claim credit on the tax they pay on the fuel.
"While GST is going to be extremely helpful to the manufacturing sector, there are certain difficulties in store for the services sector, including airlines," the finance chief of an Indian carrier told ET requesting anonymity.
The estimated normal GST is pegged at 17 to 19%; while on some 'demeritted' goods like luxury cars, it will be 40%. Concessional goods and services will have it at 12%.
05/08/16 Business Insider
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