Service Tax to be imposed on air tickets from July 1

Domestic and international air fares would rise by Rs100 and Rs500 respectively from July one with the government issuing a notification to bring air travel into the service tax ambit.

   
Government had proposed in the 2010-11 Budget that 10% service tax be charged on air travel aiming at raising Rs600 crore and Rs1,000 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.

   
The notification, issued by the department of revenue on Tuesday, said that for domestic travel, "10% of the gross value of ticket or Rs100 per journey, whichever is less" would be charged from passengers travelling in any class -- business or economy.

   
For international journey, it would be "10% of the gross value of the ticket or Rs500 per journey, whichever is less, for passengers embarking in India for an international journey in economy class."

   
The measure would come into effect from July one, the notification said.

   
A service tax of little over 12% is already imposed on foreign travel by business or first class since the past several years.

   
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 of the service tax, describing it as "unacceptable" and "counter-productive".

   
Following this, the government decided to cap the hike at Rs100 for all domestic travel and Rs500 for economy-class foreign travel, leaving the tax on upper class international journeys as it is.