Budget 2011: Domestic air travel to cost more

Domestic air travel will cost more from the next financial year with the government raising service tax on it by Rs50 and Rs250 for domestic and international journeys respectively.

Presenting the 2011-12 budget in the Lok Sabha, finance minister Pranab Mukherjee also proposed to tax travel by higher classes on the domestic sector at the standard rate of 10%.

The increase in service tax on air travel would be effective from April one.

From then on, the tax on economy class domestic travel would stand at Rs150 instead of the current Rs100 and Rs750, as against Rs500, for international travel.

Domestic travel on business or high class would attract a flat service tax of 10 per cent of the fare. This would bring domestic air travel on higher classes on par with international journeys by the same classes, Mukherjee said.

However, there was relief to the Air India as the finance minister made a budgetary support of Rs1,200 crore to the ailing national carrier as additional equity infusion.

This would be the third tranche of equity for Air India, which received Rs800 crore and Rs1,200 crore respectively in the 2009-10 and 2010-11 budgets.

A total expenditure of Rs2,393.88 crore, both plan and non-plan, has been proposed for the civil aviation ministry in the budget.

The services being provided within an airport under the 'works contract' for specified purposes was being exempted, the explanatory memorandum said.

The value of air freight included in the assessable value of goods for charging customs duties is being excluded from taxable value for levy of service tax under the 'transport of goods by air' service, it said.