Domestic and international air travel is set to get costlier from April this year, as the finance minister Pranab Mukherjee proposed to increase rates of service tax in his budget speech.
Domestic travel will get costlier by Rs 50, with service tax being raised from Rs 100 to Rs 150, while international travel would pinch you more as service tax has been increased by Rs 250 from Rs 500 to Rs 750.
Mukherjee also proposed to tax travel by higher classes on the domestic sector at the standard rate of 10%.
“A basic customs duty of 2.5% is being imposed on imports of aircraft for non-scheduled operations. The exemption for additional duty of customs and special additional duty of customs would continue,” the budget documents state. This means that jets for private use and those used for chartered services would cost more.
“Exemption from education cess and secondary and higher education cess presently available to aircrafts is being withdrawn,” the documents said.
“The increase in service tax for air travel will not have a major impact on travel as the travel industry is growing at double digits and the hike is minimal especially for domestic travel. Air fares have been climbing for the last three months due to increase in fuel prices, but this has not deterred passengers from traveling,” said Peter Kerkar, Director, Cox and Kings Ltd.
“The aviation sector which is reeling under the global economic slowdown, has received further set backs in Budget 2011,” said Saloni Roy, partner infrastructure practice, Ernst & Young.
“Separately, the long standing request of the aviation industry to include all aviation turbine fuel within the list of declared goods has not been fulfilled,” she said.