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The budget proposal to levy 10 per cent service tax on domestic business class travel will have an adverse affect on the aviation sector, domestic airlines said on Friday in a meeting with the Minister for Civil Aviation, Mr Vayalar Ravi.
The Federation of Indian Airlines (FIA), an umbrella body of airline companies in India, met the Minister and conveyed to him that the introduction of service tax on business and first class travel on international flights and in business class on the domestic sector would cut into the already thin margins of the airline business.
The service tax, 10.3 per cent of the total value of a ticket, would increase the price of a ticket by Rs 3,000-Rs 3,500. Airlines said they will be forced to reduce business class fares so that loads do not fall. The airlines also said the proposal could hurt “the revenue as well as yields of the airline business”. Among those who met the Minister include FIA Chairman, Mr Vijay Mallya, Chairman of Jet Airways, Mr Naresh Goel, IndiGo President, Mr Aditya Ghosh.Issues pertaining to high airport charges in the country and the need to rationalise taxes which States levy on aviation turbine fuel (ATF) also came up at the meeting.
FIA has been asking the Government to declare ATF as ‘declared goods' so that it attracts uniform sales tax of four per cent across India. At the moment, sales tax on ATF varies from 4 per cent to more than 30 per cent across the country.
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