Industry challenges Union tax increases
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Lead by Civil Aviation Minister, Vayalar Ravi, the domestic and international airline industry has called on the Indian government to revise its hike in service tax on air tickets.
The recent budget proposal from the Ministry of Finance will see increased service taxes across all classes of domestic and international air travel, causing concern among domestic carriers and even triggering criticism from the International Air Transport Association (IATA).
The global industry representative said that such taxes will narrow profit margins across the industry. In response, Ravi has written a formal letter to the Finance Minister, Pranab Mukherjee, urging him to reconsider the implementation of service tax on air travel and Ravi has also appealed to all state governments to reduce sales tax on aviation turbine fuel. The tax hikes are affecting the interests of the travelling public as well as private aviators. The Directorate Genral of Civil Aviation and the Civil Aviation Ministry have been working closely with airlines in the last few months to keep the cost of air travel down. However with the jump in service tax and other government charges, like fuel tax for instance, will force the cost of an air ticket up by approximately 10%. According to a TOI report, state-run oil firms last month raised jet fuel prices by 4%, forcing airlines to raise their fuel surcharge by up to INR200.
Ultimately, the persistent tax increases are being passed onto the consumer which is impeding industry growth and all the associated multiplier effects of improved connectivity. It contradicts the efforts of the DGCA and the Civil Aviation Ministry who have been trying to increase public accessibility to air travel.
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