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Cap rate at 15% or growth will be hit, airlines tell govt
NEW DELHI: Airlines have asked the government to set the goods and services tax (GST) at 15% and retain existing tax exemptions to avoid fare hikes.
NEW DELHI: Airlines have asked the government to set the goods and services tax (GST) at 15% and retain existing tax exemptions to avoid fare hikes.
GST will subsume most of the indirect taxes levied by the centre and the states including excise duty, service tax, value-added tax, entertainment tax and luxury tax. The tax is expected to be implemented next year.
The current rate of service tax is 14% and adding Swachh Bharat Cess and Krishi Kalyan Cess, airlines have to pay 15% as total service tax. “Under no circumstance should GST exceed 15%,” said an airline official, referring to the submission made to the government last week. “It would hamper growth in the fastest growing aviation market in the world.”
Airlines expect a 9% to 15% rise in airfares if the GST is set higher.
A group of airline officials met state finance ministers and aviation ministry officials last week to convey the implications of the new regime to the sector.
Most of India’s airlines have been making losses over the past few years and some have high debt. A plunge in fuel prices has seen some airlines report profits in the last fiscal. Fuel makes up of about 40% of their total cost.
Airlines have, therefore, also requested the government to exempt them from paying duty on fuel surcharge component of the airfare. Most airlines typically mention the amount of fuel surcharge on every ticket, which is part of the overall price.
“This is based on the reason that duty has already been paid on ATF (aviation turbine fuel) and it has not been allowed as credit. Hence, levying GST on that portion will result in double taxation,” said another airline official.
