After the announcement of the four fold hike in the service tax on air travel, the Civil Aviation Ministry (CAM) have strongly opposed the budget proposal. The CAM termed it as a retrograde step that would hit the fliers as well as the airlines very hard.
After the Finance Bill was passed in the Parliament, the Civil Aviation Minister Ajit Singh sent a letter to the Finance Ministry to protest the proposal. The proposal was protested on the grounds that the move will hit the passengers as well as the airlines, which are already suffering under heavy financial stress.
Singh said that the proposal of raising the service tax from 10% to 40 % of the gross ticket value would make the air tickets costlier. At present there is a cap of Rs. 100 per journey for the domestic sector in any class, while Rs.
500 for the international journey. Singh said, “High tax regime on aviation will reduce the wider economic benefits available from aviation, resulting in a negative impact on economic growth and overall government’s revenue basis.”
The minister observed that the taxation on the air transport sector was already disproportionately high and in such a case if the service taxes were raised, then it would retard the development of th aviation industry.