Giving some respite to travel agents across the country the government has said that service tax on air travel will only be levied on bookings after July 1 and not on travel.
Speaking exclusively to Travel Gazette India, Rakesh Tiwari, President, Commercial Operations, GoAir, confirmed that according to a new government notification, service tax is for only bookings after July 1, not on travel.
“This makes things simpler and we’ll make sure we have systems in place to charge it,” he added. This means that passengers who have already purchased their tickets for travel after July 1 would not have to pay this additional tax.
Earlier air travel was set to get costlier from next month with the government notifying that the service tax of Rs100 on domestic travel and Rs500 on international flights would be charged from July 1.
In Budget 2010-11, finance minister Pranab Mukherjee had announced that service tax would be levied on domestic air travel, irrespective of class and also on economy international travel.
This tax was levied only on business and first class on international flights. Following a hue and cry that the 10.3% additional levy would deal a blow to air travel, which has just recovered, Mukherjee had relented by announcing a cap of Rs100 on domestic air travel and Rs500 on international flights in economy class.
The government had proposed in the 2010-11 Budget that 10% service tax to be charged on air travel, aiming to raise around Rs1,600 crore.
In the notification, the department of revenue said that service tax on domestic travel would be 10% of the gross value of the ticket or Rs100 per journey, whichever is less.
Since there’s hardly any air ticket with a net fare of less than Rs1,000, the component is almost going to be a fixed Rs100 per journey.
Similarly for an international economy class journey, the 10% tax on the gross value of the ticket or Rs500 per journey, whichever is less, for passengers embarking in India for an international journey in economy class.
This once again translates into a flat tax of Rs500 per journey. Business and first class travellers need to pay a service tax of 12%.
