{"id":2555,"date":"2018-03-06T08:51:34","date_gmt":"2018-03-06T08:51:34","guid":{"rendered":"http:\/\/www.gsthelplineindia.com\/blog\/?p=2555"},"modified":"2019-11-07T13:11:10","modified_gmt":"2019-11-07T13:11:10","slug":"gst-impact-on-aviation-sector","status":"publish","type":"post","link":"https:\/\/www.gsthelplineindia.com\/blog\/2018\/03\/06\/gst-impact-on-aviation-sector\/","title":{"rendered":"GST Impact on Aviation Sector &#8211; Rate on International &#038; Domestic Flights"},"content":{"rendered":"<p>The implementation of Goods and Services Tax (GST) as an indirect tax in India has affected almost every major and most minor business sectors of the country. Indian Aviation is one such industry which was affected by the launch of GST. Let\u2019s try to understand the impact of GST on aviation sector, both long term and short term.<\/p>\n<div id=\"toc_container\" class=\"no_bullets\"><p class=\"toc_title\">Contents<\/p><ul class=\"toc_list\"><li><\/li><li><ul><li><\/li><li><\/li><li><\/li><li><\/li><li><\/li><li><\/li><\/ul><\/li><\/ul><\/div>\n<h2><span id=\"GST_Rate_on_Domestic_and_International_Flights\">GST Rate on Domestic and International Flights<\/span><\/h2>\n<p>The major impact of GST on international and domestic flights was in the form of revised tax rates of airfares. After the launch of GST, the tax rates on both economy and business class airfares were changed. Whereas the tax on Economy class air travels was reduced, the rate on Business class airfares is now higher. Take a look below for GST effect on international and domestic flights.<\/p>\n<p><strong>Pre-GST (service) tax rates on air travel<\/strong><\/p>\n<ul>\n<li>Economy class: 5.6%<\/li>\n<li>Business class: 8.4%<\/li>\n<\/ul>\n<p><strong>After-GST tax rates on air travel<\/strong><\/p>\n<ul>\n<li>Economy class: 5%<\/li>\n<li>Business class: 12%<\/li>\n<\/ul>\n<p>As you can see, the tax rate on economy class air tickets has been reduced to 5%, the business class tickets are now liable for 12% tax.<\/p>\n<p>The flight ticket prices have not much changed for the economy class travellers due to the minor reduction in rates, however, the business class travellers are certainly seeing a noticeable difference in their ticket costs after GST.<\/p>\n<p><strong>Recommended<\/strong>: <a href=\"https:\/\/www.gsthelplineindia.com\/blog\/2018\/01\/04\/gst-impact-on-tourism-industry\/\">GST impact on tourism industry<\/a><\/p>\n<h2><span id=\"Short-Terms_Impacts_on_Airlines\">Short-Terms Impacts on Airlines<\/span><\/h2>\n<h3><span id=\"Decrease_in_cost_of_Economy_Class_Air_Travels\">Decrease in cost of Economy Class Air Travels<\/span><\/h3>\n<p>The cost of economy class air travels is now reduced, thanks to a lower GST rate (5%) on tickets.<\/p>\n<h3><span id=\"Increase_in_ticket_cost_for_Business_Class_Air_Travels\">Increase in ticket cost for Business Class Air Travels<\/span><\/h3>\n<p>Business class air trips are now costlier, thanks to 12% GST on business class air tickets. The increase in ticket prices may temporarily affect the cash flow for small airlines.<\/p>\n<p><strong>Also Read<\/strong>: <a href=\"https:\/\/www.gsthelplineindia.com\/blog\/2017\/07\/12\/gst-impact-on-businessman-traders\/\">Impact of GST on Businessmen<\/a><\/p>\n<h3><span id=\"No_ITC_on_Jet_FuelATF\">No ITC on Jet Fuel\/ATF<\/span><\/h3>\n<p>Since fuel has been kept out of GST ambit, airlines are unable to claim ITC for tax paid on aviation turbine fuel (ATF) and other types of fuel.<\/p>\n<h3><span id=\"GST_on_Aircraft_Leasing\">GST on Aircraft Leasing<\/span><\/h3>\n<p>Those, who are planning to lease an aircraft, will now have to pay \u2018nil\u2019 GST on such imports. Previously, it was set on 5% but later removed because of the increased tax burden on airline operations. Before GST, there was a service tax levied on only 10% of total lease amount.<\/p>\n<h3><span id=\"GST_on_repairmaintenance_of_aircrafts\">GST on repair\/maintenance of aircrafts<\/span><\/h3>\n<p>In the pre-GST regime, both service tax and VAT were applicable on aircraft repair services, however, this is being treated as a pure service transaction under GST, thus reducing the tax burden by removing the cascading of taxes.<\/p>\n<p>Import of aircrafts on lease is tax-free under GST, so it has become cheaper to import aircrafts and spare parts from outside of India.<\/p>\n<h3><span id=\"Increased_Compliance_Cost\">Increased Compliance Cost<\/span><\/h3>\n<p>As per GST rules, a business has to acquire registration in every state where it conducts a supply. Airlines are therefore required to register in every state in which they provide service. They have to pay 28% inter-state GST on the transfer of airline parts and aircraft, which has increased the compliance cost for this industry.<\/p>\n<p>As for the long-term impact of GST on the aviation industry, it depends on a number of things. For low-cost domestic travellers, things definitely seem better as they are now paying lower than before. Business class passengers are paying more, but not by a big margin. Airlines can <a href=\"https:\/\/www.gsthelplineindia.com\/blog\/2017\/08\/24\/input-tax-credit-gst\/\">claim ITC on inputs<\/a> provided by them such as spare parts, food items (if any), etc.<\/p>\n<p>Some airlines are reporting an increase in the cost of operations while some have already increased ticket prices to keep up with tax burdens. Since there is a tax on exporting of aircraft engines and other parts, this has also increased tax burden resulting in an increase in the ticket costs for common people.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The implementation of Goods and Services Tax (GST) as an indirect tax in India has affected almost every major and most minor business sectors of the country. Indian Aviation is one such industry which was affected by the launch of GST. Let\u2019s try to understand the impact of GST on aviation sector, both long term &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/www.gsthelplineindia.com\/blog\/2018\/03\/06\/gst-impact-on-aviation-sector\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;GST Impact on Aviation Sector &#8211; Rate on International &#038; Domestic Flights&#8221;<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":2568,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[3],"tags":[359,357,361,358,360,355,356],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>GST Impact on Aviation Sector - Rate on International &amp; Domestic Flights<\/title>\n<meta name=\"description\" content=\"Are you planning for the holidays this season? or do you travel by the air flights most of the times for the business purposes? 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