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Your foreign trip just got costlier

Beginning May 1, a service tax of 12.24% will be levied on all int'l air tickets, writes Nandini R Iyer.

india Updated: Apr 29, 2006 02:41 IST
Nandini R Iyer
Nandini R Iyer

International air travel just got costlier. Beginning May 1, a service tax of 12.24 per cent will be levied on all international air tickets (business and club class, not economy) for those embarking from India.

So if you don't want to part with your club class comfort but don't want to spend more on an already expensive ticket, you have just one way out: Book your ticket in the next two days.

Though this tax was part of the Finance Bill, the finance ministry's notification this week - specifying that it would be effective from May 1 - has caught travel associations and airlines off guard.

The industry contends that the ministry's notification is very general and only says "embarking in India for international journey". "It does not clarify whether the tax applies to foreign nationals who have a ticket booked from another country (say, London-Mumbai-London)," asked a travel operator.

More queries. "If someone purchases a ticket for Delhi-Vienna-London-New York-Delhi, do we charge the tax only for Delhi-Vienna or on the entire journey," an industry representative asked.

The International Air Travel Association has already written to Finance Minister P. Chidambaram and Civil Aviation Minister Praful Patel asking for a roll back. And if that is impossible, they at least want clear guidelines on how the tax is to be implemented and more time to make the changes.

IATA's India country manager Robey Lal told Hindustan Times, "Not only will the tax counter India's efforts to increase tourist arrivals, it contravenes international conventions on taxation of air travel."

Industry sources fear that a lot of ticketing trade could shift to neighbouring countries like Sri Lanka, Bangladesh and Nepal once the political situation eases there.

And of course, there are ways of getting round the tax. "Someone in Chennai flying business class to multiple destinations can fly Chennai-Colombo and then onwards. It works cheaper that way. For foreign tourists, it might become cheaper to enter India from a neighbouring country rather than use India as a transit point," said the spokesman of one of the travel associations.

First Published: Apr 29, 2006 01:11 IST