IATA appeals to exempt int'l air ticket from service tax

Global airlines body IATA today made an appeal to the government, among others, to exempt international air ticket from service tax, for ease of doing business here, even as the Civil Aviation Ministry said there were different laws and regulations in different countries.

"The application of Service Tax should be aligned with a principle that it does not apply to services rendered outside of India including those for overflight charges, global distribution systems, extra baggage fees and international tickets," IATA Director General and CEO, Tony Tyler said.

He was delivering a keynote address at the Aviation Day conference organised by International Air Transport Association (IATA), business umbrella body Confederation of Indian Industries (CII) and the Ministry of Civil Aviation here.

The conference was attended by a host of senior airlines executives, officials from the Civil Aviation Ministry and Directorate General of Civil Aviation, as well as aviation industry experts.
In his speech, Union Civil Aviation Minister Ashok Gajapathi Raju said there were different laws and regulations in different countries and India would have to develop its own, keeping in mind the prevailing circumstances.

Observing that there was a need to follow international treaties that protect airlines from double-taxation on income, Tyler suggested that the incoming GST regime should also "zero-rate international air transport services in line with OECD (Organisation for Economic Co-operation and Development) guidelines."

Pointing out that already aviation and aviation-related tourism support seven million Indian jobs and USD 23 billion of India's GDP, that is just 100 million people travelling by air this year to and from within India, Tyler said the healthy growth of the sector has the potential to expand these benefits tremendously.

"We see the potential for that to increase to nearly 280 million by 2029, by which time India would hold the rank of the world's third largest market, and by the end of our forecast period in 2034, we see a further rise to 360 million passengers. That amazing growth will bring even more benefits to India's development," Tyler said.

"But there are immense challenges which must be overcome as seen in the sector's financial performance. While demand growth is robust and some airlines are generating profit, sector-wide losses for India are still expected to exceed USD 1 billion this year," he said.

Onerous regulation and processes, debilitating taxes and expensive infrastructure are holding back the industry's ability to deliver greater economic benefits to India, Tyler said.

He said the need to avoid double-taxation within India "in situations where airlines are effectively taxed on taxes collected."

India needs smarter regulation, he said, adding, this essentially means taking a business-like approach to regulation using common sense and proven principles.

In a bid to slash airport charges, Tyler also urged the government to "overcome legal challenges which prevent AERA's recommendation for a 78 per cent reduction in Delhi's airport charges from being implemented."

He emphasised the need for allowing the Airports Economic Regulatory Authority (AERA) to do its work "independently".

"Regulation is also holding back the development of the sector. Well-intentioned regulations, but which are inconsistent with global standards, make doing business in India very difficult for the airlines. India imposes rules and requirements that are not seen anywhere else," Tyler said.

To bring down costs of the domestic aviation sector, Civil Aviation Secretary R N Choubey said the ministry is open to various avenues including the possibility of carriers pooling their orders for aircraft.

Other options could be declaring aircraft purchase as an infrastructure activity, which would mean that costs related to the purchase would be lower, he said.

"We will make all efforts to ensure that ATF prices are kept as cheap as possible," he said, adding, as part of efforts to improve the ease of doing business for aviation players, the ministry is looking to do away with the current norm that require entities to seek prior permission before importing aircraft.

Vistara chief executive Phee Teik Yeoh appreciated the ministry's stand to include the views of the industry to figure out impediments, going forward.

"I think they have taken necessary steps and taken a more consultative approach in recent times, which is a good sign," he said, adding, any policy which is there has to be sustainable.

Vistara, as a responsible airline, supports the government on its objective of providing air connectivity to the remote regions, he said.