GST rate impact: Economy airfare to become cheaper, biz class costlier

The announcement is in line with the government's aim to make flying affordable for the masses.

PTI May 20, 2017 11:36:29 IST
GST rate impact: Economy airfare to become cheaper, biz class costlier

New Delhi: Economy class air travel will become cheaper with tax rate fixed at 5 percent against the existing 6, under the upcoming GST regime from 1 July.

However, for those travelling business class, tickets will become dearer as the tax will go up from 9 percent to 12 percent.

Industry experts say that today's announcement is in line with the government's aim to make flying affordable for the masses.

"Government's decision to levy 5 percent and 12 percent tax for economy and business class is a very good decision which will continue to support affordable fare regime in India. The government was sensitive to the impact of higher GST slab on industry and the consumer is significantly positive," according to Sydney-based aviation think-tank CAPA Centre of Aviation.

GST rate impact Economy airfare to become cheaper biz class costlier

Representational image.

The GST Council finalised four tax rates of 5, 12, 18 and 28 percent to apply on services including telecom, insurance, hotels and restaurants.

CAPA also said that this is likely to further boost domestic aviation traffic, where India is at the third spot.

India's domestic air passenger traffic stood at 100 million in 2016 and was behind only to the US (719 million) and China (436 million).

"Expect high growth rate in domestic traffic to continue in the near-term with further upside once the GST impact on the economy is visible in 1-2 years," it added.

The sentiment was echoed by travel portal Yatra.com. "Overall, this seems like a good move for the sector and should help the growth momentum continue. Economy airfare will get marginally cheaper which should drive continued passenger growth in the air market, while business class will see a moderate increase," Sharat Dhall, COO, Yatra.com.

The 5 and 12 percent tax rates come as a huge relief for the industry, which had expressed concern over the draft GST law released last year pegging tax rate at 17 percent to 18 percent. This, as per a PwC study, would have led to a 9 percent to 12 percent increase in the cost of air travel for passengers.

A reason for keeping GST on passenger travel low is because airlines cannot claim credit on aviation turbine fuel under the GST regime.

Currently, airlines can claim what is called a CENVAT credit on the central excise duty for fuel. They will now lose as petroleum products, including ATF, are outside the purview of GST.

However, purchase of aircraft meant for personal use, has been put under the highest slab of 28 percent. This will also invite an additional cess of 3 percent

Updated Date:

Find latest and upcoming tech gadgets online on Tech2 Gadgets. Get technology news, gadgets reviews & ratings. Popular gadgets including laptop, tablet and mobile specifications, features, prices, comparison.

also read

Historic Air India flight, manned by all-women cockpit crew, takes off from San Francisco for Bengaluru
India

Historic Air India flight, manned by all-women cockpit crew, takes off from San Francisco for Bengaluru

Air India has said this will be the longest commercial flight in the world to be operated by it or any other airline in India. AI176 will fly over the North Pole and take the Atlantic route to Bengaluru

GST authorities arrest 215 persons in fake invoice cases, recover Rs 700 crore over two months
India

GST authorities arrest 215 persons in fake invoice cases, recover Rs 700 crore over two months

Those arrested include managing directors, proprietors and partners of business and trade entities either involved in availing or utilising the ineligible input tax credit fraudulently

India-UK air travel to resume from 8 January; 30 flights to operate per week, says govt
India

India-UK air travel to resume from 8 January; 30 flights to operate per week, says govt

Carriers from India and the UK will each be operating 15 flights per week till 23 January to and from Delhi, Mumbai, Bengaluru and Hyderabad only