Vayalar Ravi wants reconsideration on service tax on air travel

Union civil aviation minister Vayalar Ravi on Monday said he wants the government to reconsider the budget proposal to raise service tax on air tickets.      

"I have written a letter to the finance minister (Pranab Mukherjee) urging him to reconsider the implementation of service tax on air travel," Ravi told reporters here.

His statement came days after domestic airlines protested the proposed raise in service tax on all classes of air travel, both domestic and international. The global airlines body IATA also said that such taxes would compromise the industry's ability to maintain margins.

Ravi said he would also appeal to all state governments to reduce sales tax on aviation turbine fuel (ATF).

"Every state government wants to increase their revenue (by imposing state-level taxes). But this is adversely affecting the airline industry. The airlines are doing public service," the minister said.

The service tax and other cess, proposed in the budget, would raise the total ticket value by at least 10.3% and,  consequently, the price of a domestic business class ticket would cost Rs3,000-3,500 more, according to the Federation of Indian Airlines (FIA), the umbrella body of Indian airlines.

State-run oil firms last month increased jet fuel price by a massive 4%, the ninth straight increase in rates since October last year. This led Jet Airways to raise hike fuel surcharge on air tickets by Rs100 and Rs200 on distances of between 1,000-2,000 km and over 2,000 km respectively.