Air tickets to get costly from July 1

Domestic and international air fares will rise by Rs 103 and Rs 515 respectively.

New Delhi: Domestic and international
air fares will rise by Rs 103 and Rs 515 respectively with a
government notification to bring air travel into the service
tax ambit coming into effect from tomorrow.

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

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

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. However, from tomorrow there will be no service tax on
construction of some low-cost housing, power distribution,
foreign travellers in transit, services within ports and
airports, and certain tournaments and championships and few
other areas.

Low-cost housing under the Jawaharlal Nehru National
Urban Renewal Mission and the Rajiv Awas Yojana have been
exempted from service tax beginning July 1. The government
also exempted certain services that are provided within ports
and airports from tax.

"Repair of ships or boats or vessels belonging to the
Government of India, including the Navy or the Coast Guard or
the Customs, but does not include government owned public
sector undertakings," the CBEC had said in an earlier

Other services within ports and airports that have
been exempted from tax are supply of water, supply of
electricity, medical treatment, formal education, fire service
agencies and pollution control services.

The Finance Ministry exempted the taxable services
provided to any person by another person authorised to
distribute power under the Electricity Act 2003 for
power distribution.

Besides, tax exemption has been allowed to tournaments
and championships organised by certain bodies such as national
sports federations or federations affiliated to it, School
Games Federation of India, Association of Indian Universities
and Paraolympic Committee of India, among others.

The government also exempted foreign travellers from
service tax if they are in transit to a different country
without passing the immigration and customs area.
People employed or engaged by the aircraft operators
in any capacity on board the aircraft have also been exempted.

Further, the finance ministry has postponed the
exemption of service tax in relation to transport of specified
goods by railroads. The exemption, which was earlier delayed
to July 1 from April 1, has now further been delayed till


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