The Hindu Business Line : Foreign airlines to meet in Mumbai

Upset at the latest budget proposal of levying a 12 per cent service tax on first and business class international air travel, the airline industry is to meet in Mumbai in the next few days to decide on the future course of action.

Official sources said that the next meeting of the Bureau of Airline Representatives (BAR) would take up not only the impact of the implementation of the latest Budget proposal but also how the Fringe Benefit Tax (FBT) would affect the industry. The BAR is an apex association of international airlines that meets regularly to take up issues affecting the industry.

"Why is the Government after the airline industry. Why not go after those investing in luxury cars each of which costs almost as much as a 100 first class tickets between India and the UK," a senior airline official said.

The industry is also worried that the implementation of the latest tax proposal could lead to passengers preferring to travel by economy class instead of business class on flights to close-by international destinations. The implementation of the latest Budget proposal would see business class airfares between India and the Far East increase by about Rs 7,000 while the first class fare on the India-London sector would increase by about Rs 30,000.

Officials claimed that a clearer picture on the service tax impact would become clear after the Government clarifies on what fare level the new tax is to be levied.

On the issue of FBT, sources said that it is wrong to consider free tickets as perks and therefore liable to be taxed. "Airline officials are allowed to travel on free or concessional tickets only when there is space on the aircraft. It is not as if we are displacing a passenger who has paid for their travel. So how can you put a value on the ticket and tax us on that," an airline official said.