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Service tax may deter international travel in executive class

Written by: Staff

New Delhi, Mar 5 (UNI) Imposition of 12 per cent service tax on international business and first class air travel is likely to see many executive class passengers opt for the economy category -- especially in short-haul sectors.

Business and first class international fares are generally three to five times higher than economy fares. With airlines in no mood to absorb the tax, it will further widen the fare difference business and economy class travellers.

A week after the Budget 2006-07, it is still unclear whether the tax will be imposed on full list fares or discounted ones that airlines offer to corporate travellers.

Industry experts say this may even force airlines to change the seat-mix between business and economy seats in international flights. A third of all seats in a flight are allocated to business and first class categories.

The government has clarified that it is airlines' liability to pay service tax and it does not pertain to transit passengers. While the burden will be borne by a passenger, airlines have to collect the levy, account for it and pass it on to the government.

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