Date:02/03/2006 URL: http://www.thehindubusinessline.com/2006/03/02/stories/2006030202120700.htm

Back Airlines surprised at new tax proposal

Our Bureau

Move unlikely to have adverse impact: Air India officials

New Delhi , March 1

The Government's decision to levy 12 per cent service tax on international air travel by first or business class has taken a large part of the airline industry by surprise.

"It is clear that the Government is keen to mop up funds from those who are in a position to pay for luxuries. However, why they should also tax business class passengers is puzzling. Nowadays, people travel by business class as it is necessary to meet their business needs and not as a class statement," a senior official of an online travel company said.

Echoing almost similar concerns, the spokesperson of a South-East Asian airline said that this move was not be conducive to the industry's growth. Air India officials, however, said that the move was unlikely to have an adverse impact.

While the Directorate-General of India (DGCA) fares for travel between Mumbai and London in first class are Rs 2,62,000, travel in business class costs Rs 1,86,000.

However, a passenger travelling in economy class will be required to pay as little as Rs 18,000.

The Budget proposal of 12 per cent service tax on international air travel is not applicable to economy class passengers.