Flight prices may rise due to GST implementation

Goods & Services Tax
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AirGoods and Services Taxes will soon be going to roll out. Due to the implementation of GST on various products, many are getting cheap while some are getting expensive. To add to the list India’s Aviation Industry is planning the increase the airfares to compensate the effect of GST.

A senior Airlines executive said “Under GST, airlines will be taxed for importing spares for their use and on aircraft lease rentals, and these are not being taxed in the current regime. Any new tax on the aviation industry, which operates under thin margins, may drive fares higher”.

Alexandre de Juniac, director general IATA said “Regarding input tax credits (ITC), the lower rate of 5% on economy class travel comes with restrictions, whereby ITCs can be claimed on input services. ITCs are not claimable on the purchase of good or stock transfer”. While in the letter to Arun Jaitley, he wrote “For premium travel (IGST rate of 12%), full ITC reclaim is available on both input goods and services. Our Indian-based members are concerned that the ITC”.

Airlines are concerned that not only the potential increase in tax incidence but reductions in input tax credits on revenues can reduce operating flexibility.