Airfares may soar

A careful reading of the Finance Bill will bring out this fact and this would mean a direct impact of 10% in air fares.

“Yes, all air passengers have to pay service tax,” said Ankur Bhatia, chief executive of Bird Group, an aviation consultancy firm. “Earlier, service tax on air passengers was restricted to first and business class travel.”

The language of the Finance Bill’s clause broadly says such tax rate will be levied on services rendered to all passengers by an aircraft operator in relation to scheduled or non-scheduled air transport for both domestic or international journeys. A flight ticket — say, between Delhi and Bangalore — costing Rs 5,000 with a  base fair of Rs 3,500 may cost Rs 350 extra due to the 10 per cent service tax.

The increase in fairs may even be more than 10 per cent, as the Aviation Turbine Fuel (ATF) could possibly increase after the budget proposals. The five per cent hike in customs duty on ATF may shoot up jet fuel prices by Rs 1,200 per kilo litre and it is possible that the airlines may pass this on to passengers. The budget has also effected an increase in excise duty by two per cent on the components which airlines import.