Domestic, international air travel to come under service tax net from today

Domestic, international air travel to come under service tax net from today 01 July 2010

Domestic and international air travel will come under the service tax net from Thursday. However, the service tax collected by low-cost carriers may vary from that collected by full-service carriers such as Air India and Jet Airways.Call centre executives of SpiceJet, Indigo and GoAir told Business Line that the service tax will be levied on a “per sector per passenger” basis.However, Jet Airways and Air India said that they will collect tax on a “per ticket” basis.For instance, a Mumbai-Delhi-Mumbai flight on Jet or Air India will charge Rs 103 as service tax. For the same configuration, Indigo, Spice or GoAir will charge Rs 206.The former group of airlines considers the trip as journeys made on a single ticket, while the other group considers the trip as two journeys.What appears is that the directive issued by the Ministry of Finance regarding levy of service tax has been interpreted by the low-cost and full-service carriers differently.According to the directive, effective July 1, service tax of 10.3 per cent or Rs 103 (whichever is lower) will be levied for all classes on domestic flights.For economy class on international flights, the levy will be 10.3 per cent or Rs 515 (whichever is lower).

The decision to levy a service tax on domestic and international flights was announced as part of Budget 2010-11.A senior official of GoAir said, “The circular sent by the Ministry clearly states that the charge has to be levied on a per-journey basis. A Mumbai-Delhi-Mumbai ticket is actually two journeys, so the double charge.”Jet Airways said in a statement: “A 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 July 1, 2010, according to the directive of the Ministry of Finance, Government of India.”Air India will also levy the same amount as service tax as Jet on its domestic and international passengers. Kingfisher Airlines did not respond to queries.The service tax is only applicable on journeys originating in India.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.Passenger service fee and airport charges will not be covered for determining the gross value of the ticket.However, some sectors have been excluded from service tax.These include journeys originating or terminating in airports located in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura, Bagdogra in West Bengal and Srinagar, Leh and Jammu.Meanwhile, Travel Agents Association of India has opposed the Government's move, calling it a case of dual taxation.

Source:The Hindu Business Line