Service tax to be imposed on air tickets from July 1

Government had proposed in the 2010-11 Budget that 10 per cent service tax be charged on air travel aiming at raising Rs 600 crore and Rs 1,000 crore annually. It had proposed to expand the scope of air transport services to attract service tax to include domestic journeys and international journeys in any class. However, airline crew travelling on duty and UN staff are exempted from paying this service tax.

The notification, issued by the Department of Revenue over a week ago, said that for domestic travel, "10 per cent of the gross value of ticket or Rs 100 per journey, whichever is less" would be charged from passengers travelling in any class -- business or economy. For international journey, it would be "10 per cent of the gross value of the ticket or Rs 500 per journey, whichever is less, for passengers embarking in India for an international journey in economy class."

A service tax of little over 12 per cent is already imposed on foreign travel by business or first class since the past several years. Air travellers would be exempted from paying this tax while embarking on a journey originating or terminating in an airport located in the northeastern states of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura and Bagdogra in West Bengal.

They would also be exempted for journeys originating in Jammu and Kashmir from the airports of Srinagar, Leh and Jammu. The move to impose the tax in this year's budget was opposed by all Indian carriers as well as the global airlines body, International Air Transport Association which sought a roll back, describing it as "unacceptable" and "counter-productive". Following this, the government capped the hike at Rs 100 for all domestic travel and Rs 500 for economy-class foreign travel, leaving the tax on upper class international journeys as it is.

Jet Airways said the service tax of 10.3 per cent on the gross value of tickets for all classes on domestic flights and economy class on international flights will be levied on tickets sold, issued or re-issued, effective tomorrow. "All domestic travellers would thus have to bear a service tax of 10.3 per cent on the gross value of the ticket or Rs 103, whichever is lower," the airline said in a release.

This service tax as collected will be credited to the government of India service tax account. "The gross value of the ticket for the calculation of the service tax will include the base price and fuel surcharge in addition to the congestion fee," Jet said. Passenger service fee and airport charges (UDF/ADF) will not be covered for determining the gross value of the ticket, it said.

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