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Fares up in the air

This Budget brings bad news for air travellers, employees availing of corporate medical insurance and companies running vocational training institutes as these areas have been brought under the ambit of service tax.

india Updated: Feb 26, 2010 23:21 IST
HT Correspondent

This Budget brings bad news for air travellers, employees availing of corporate medical insurance and companies running vocational training institutes as these areas have been brought under the ambit of service tax.

“Air fares are expected to go up by a minimum of 10 per cent depending on the base fare. A hike in customs duty of ATF (aviation turbine fuel) will also have an impact on air fares,” said Kapil Kaul, CEO of consulting firm, Centre for Asia Pacific Aviation.

The Budget has also come as a setback for employees who get medical facilities through medical insurance provided by their employers.

The Budget has proposed to levy service tax on health services provided by hospitals and medical establishments where payments for these services are made by business entities (to whose employees, these services have been provided) or insurance companies under health insurance schemes..

At present, service tax is levied on all the charges (other than on risk premiums) recovered by insurance companies from their customers.

However, this Budget has proposed to restrict such levies only on fund management charges. This would lead to a reduction in the premium charges for customers.

“The Budget proposal to limit the Service Tax to Fund Management Charges only in ULIPs (Unit-Linked Insurance Policies), has removed the anomaly of not having a level playing field for various financial products. This step will improve the returns for life insurance policy-holders,” said T.R. Ramachandran, CEO of Aviva Life.

Prices of cable services are expected to come down as the Budget has proposed reducing import duty rates for equipment used for cable transmission.

Currently, vocational training institutes are exempt from service tax. This Budget has proposed to restrict such exemption only to institutes recognised by National Council of Vocational Training — and that too, for specified courses.

Thus, training undertaken from institutes that now draws service tax will now become costlier by 10 per cent. Even coaching taken from ‘not-for-profit’ institutes could attract service tax.