New Delhi, Feb 26: In what could be bad news for air passengers, the fares of air travel on all classes in both domestic and international sectors will possibly go up, post the government's decision to expand the scope of air transport services to attract service tax.
“The scope of air passenger transport service is being expanded to include domestic journeys and international journeys in any class," the memorandum explaining the provisions of the 2010-11 Finance Bill, presented by Finance Minister Pranab Mukherjee in Parliament on Friday, Feb 26 said.
The memorandum also carried an amendment on including all services provided within the airport premises as the 'airport services', adding that the airport authority's authorisation 'would not be a pre-condition for taxing these services'.
The announcement by the Finance Minister also mentioned 10 percent reduction on tax services rate, while certain services which were until now untaxed will come under the purview of service tax levy.
He added that the services will be notified separately.
However, the Union Budget announcement had some good news for the ailing Air India, as the budget made the provision of Rs. 1,200 crore equity infusions for it in the next fiscal as part of its financial restructuring process.
A sum of Rs 800 crore will be allotted to the airlines as the first tranche of equity infusion, which has been recently approved cleared by the Cabinet.
The total Civil Aviation Ministry allocation of Rs 9,588.30 crore, will have Rs 2,000 crore support from the budget.
Out of the budget allocation of Rs. 600.50 crore to the State-run Airports Authority of India, 120.50 crore has been reserved for development of airports in North-Eastern States.
The development of airports in areas like Leh, Ajmer, Agatti, Port Blair, Tirupati and Puducherry, besides the satellite-based navigation project called GAGAN or GPS Aided Geo Augmented Navigation system will be undertaken with the remaining Rs 480 crore.
Rs 40 crore has been earmarked for the development of the helipad at Rohini in Delhi before the Commonwealth Games and for a helicopter training institute and heliport in Pune by the Pawan Hans Helicopters Limited.
Prior to the announcement, service tax was levied only on international travel on First and Business classes.