The Impact of GST on Airline Tickets: What You Need to Know

The Impact of GST on Airline Tickets: What You Need to Know

The implementation of Goods and Services Tax (GST) in India has led to a lot of changes in the prices of various goods and services. One of the most affected industries is the airline industry. The implementation of GST has affected the prices of airline tickets in a significant way. In this article, we will discuss the impact of GST on airline tickets and what you need to know about it.

How does GST affect airline ticket prices?

Since the implementation of GST, airline ticket prices have increased. Prior to GST, service tax was applicable on airline tickets at a rate of 6%. With the implementation of GST, the tax rate on airline tickets has increased to 5% for economy class and 12% for business and first-class tickets. This increase in tax rates has resulted in higher ticket prices for passengers.

Another important factor affecting airline ticket prices is the Input Tax Credit (ITC). With the introduction of GST, airlines can claim input tax credit on various expenses incurred for running their operations, such as aviation fuel, maintenance, and repairs. However, since the GST rate on aviation fuel is higher than the previous service tax rate, this has resulted in airlines not being able to claim the full input tax credit. This has further increased the cost of operations for airlines, which has been passed on to the passengers in the form of increased ticket prices.

What are the exemptions and reliefs?

There are few exemptions and reliefs available for passengers in the GST regime. While economy-class tickets are taxed at a lower rate of 5%, business and first-class tickets attract a higher tax rate of 12%.

Similarly, passengers booking tickets for international travel are exempt from paying GST. However, passengers travelling to and from the Special Economic Zones (SEZs) or on chartered flights are liable to pay GST.

Another relief for passengers is that tickets booked before the implementation of GST, even if the travel date is after the implementation of GST, will attract the old service tax rate of 6%. This means that passengers will not have to pay the increased tax rates for tickets booked before the implementation of GST.

What is the impact on the airline industry?

The airline industry has been significantly impacted by the implementation of GST. With the increased tax rates and the inability to claim full input tax credit, airlines have been forced to increase ticket prices to cover their costs. This has resulted in a decrease in demand for air travel, negatively affecting the industry.

However, the introduction of GST has also led to the consolidation of the airline industry with smaller airlines merging with larger ones. This has resulted in improved efficiencies and cost savings for airlines, which can be passed on to passengers in the form of lower ticket prices.

Conclusion

The implementation of GST has had a significant impact on the airline industry, with increased tax rates and decreased demand for air travel. Passengers need to understand the new tax rates, exemptions, and reliefs available to them when booking airline tickets. While the increase in ticket prices may be a burden for passengers, the consolidation of the airline industry may lead to improved cost savings and efficiencies in the long run. It is essential to stay updated about any changes in the GST regime to make informed decisions when booking airline tickets.