How GST Affects the Pricing of Your Airline Tickets

Airline fares could be confusing, with fluctuating prices based on various factors. The implementation of Goods and Services Tax (GST) in India has impacted the pricing of airline tickets in multiple ways. Like any other industry, the airline industry has not been immune to the effects of GST.

Here are some ways GST has affected airline ticket pricing:

1. GST on Fuel:

Aviation turbine fuel (ATF) is a crucial component of an airline’s operation. However, with the introduction of GST, the price of ATF tends to vary from state to state, resulting in price differences in different states. This has made it difficult for airlines to maintain consistency in pricing.

2. GST on Passenger Ticket:

The GST imposed on the airline passenger ticket is 5%, which is lower as compared to the previous service tax rate of 6%. The lower tax rate has provided favorable conditions for passengers as airline fares have reduced. That being said, the impact of GST on the pricing of economy class tickets has been minimal, but for premium tickets, the effect could be significant.

3. Cascading Effect:

Prior to GST, there were various taxes levied on the airline industry, including excise duty, service tax, and VAT. These taxes were levied at different stages of the operation and added to the cost of the airline ticket. With the introduction of GST, these taxes have been streamlined to 5%, resulting in a reduction in airfare.

4. Input Tax Credit:

Under the GST regime, airlines can claim Input Tax Credit (ITC) on the tax paid for the purchase of goods and services utilized in their operations. This has enabled airlines to reduce their operational expenses, which, in turn, has helped them to keep their fares competitive.

5. Impact on International Flights:

Though GST has had a minimal impact on domestic flight fares, it has affected international flights. Airline operators do not receive ITC on the taxes paid on goods and services consumed for international flights. Consequently, the cost of aviation turbine fuel for an international flight is higher than that of a domestic flight, which leads to an increase in airfare.

Conclusion:

GST has had a significant impact on the pricing of airline tickets in India since its implementation. While it has benefited passengers to some extent, it has also impacted premium-class ticket fares, which have risen. Still, the overall effect of GST has been positive with reduced taxation and ITC being given to the airline operators, which has ultimately resulted in lower airfares for travelers.