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Economy Class Air Travel Set to Become Cheaper From July 1
Industry experts said that Friday's announcement is in line with the government's aim to make flying affordable for the masses. (Image: AFP)
New Delhi: Economy class air travel will become cheaper with tax rate fixed at 5 percent against the existing 6, under the upcoming GST regime from July 1.
However, for those travelling business class, tickets will become dearer as the tax will go up from 9 percent to 12 percent.
Industry experts said that Friday's announcement is in line with the government's aim to make flying affordable for the masses.
"Governments decision to levy 5 percent and 12 percent tax for the economy and business class is a very good decision which will continue to support affordable fare regime in India. The government was sensitive to the impact of higher GST slab on industry and the consumer is significantly positive," according to Sydney-based aviation think-tank CAPA Centre of Aviation.
CAPA also said that this is likely to further boost domestic aviation traffic, where India is at the third spot.
"Expect high growth rate in domestic traffic to continue in the near-term with further upside once the GST impact on the economy is visible in 1-2 years," it added.
The sentiment was echoed by travel portal Yatra.com.
"Overall, this seems like a good move for the sector and should help the growth momentum continue. Economy airfare will get marginally cheaper which should drive continued passenger growth in the air market, while business class will see a moderate increase," Sharat Dhall, COO, Yatra.com.
A reason for keeping GST on passenger travel low is because airlines cannot claim a credit on aviation turbine fuel under the GST regime.
Currently, airlines can claim what is called a cenvat credit on the central excise duty on fuel. They will now lose as petroleum products, including ATF, are outside the purview of GST.
However, purchase of aircraft meant for personal use has been put under the highest slab of 28 per cent. This will also invite an additional cess of 3 per cent.
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