In the 2010-11 Budget, government had proposed that a 10 percent service tax be charged on air travel, aiming at rising Rs 600 crore and Rs 1000 crore annually.
Goverment had proposed to include domestic and international journeys in any class among the air transport services, to attract service tax. The airline crew on duty and UN staff are exempted from paying this service tax.
“10 per cent of the gross value of ticket or Rs. 100 per journey, whichever is less would be charged and for international journeys, it would be 10 per cent of the gross value of the ticket or Rs. 500 per journey, whichever is less," said the notification by the Department of Revenue issued a week ago.
A service tax of a little over 12 per cent on foreign travel by business or first class has been in existence for several years.
Air travellers would be exempted from paying this tax while on a journey originating from or terminating in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Tripura and Bagdogra in West Bengal. The tax are not implemented for the journeys from the airports of Srinagar, Leh and Jammu.
Government capped the hike at Rs 103 for domestic and Rs 500 for international travel as the move to impose the tax was opposed by all Indian airlines as well as the global airlines body, the International Air Transport Association, which criticized the move as 'counter-productive' and 'unacceptable'. Government left the tax on upper class international journeys as it is.