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Domestic airlines, such as Jet Airways, Indian Airlines, Spicejet and Air Deccan, will now enjoy one more year of tax exemption on lease rentals paid to foreign lessors for their aircraft. The tax exemption on lease rentals paid by domestic airlines on aircraft or engines taken on lease from a foreign entity was originally available only if the lease agreement was inked before April 1, 2006. This benefit has now been extended by one more year. However, a 12.5 per cent service tax impost on non-economy class passengers on international routes may reduce margins in this segment for Jet Airways, as for its competitors. However, business class passengers may be seen as less price-sensitive and a part of the service tax may be passed on to them.

BL Research Bureau

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