With Holi behind us, it’s time to pull out the sunscreens and bottles of fresh juice to battle the merciless heat of the Indian subcontinent. Summer’s here and some of us have decided to stay indoors, going out only when absolutely essential. On the other hand, a considerable portion of the population is planning a getaway to cooler nations for the oncoming summer holidays. While you fret about the holiday destinations and travel shopping and what not, we have taken up the responsibility of informing you about the GST on air travel!

Impact of GST on Air Travel

For people who have booked their air tickets before 1st July 2017, no GST is applicable. The airlines have already collected the Service tax during booking.

GST Registration, GST Impact on Airlines

GST on airlines ticket:

Service Tax was applicable on both economy class tickets and business class tickets. Needless to say, GST will also be applicable on both. Here’s a comparison of the tax rates before and after 1st July 2017.

Tickets Service Tax Rate GST Rate
Economy Class 5.6% (6%) 5%
Business Class 8.4% (8%) 12%

 

As you can see, the drop in the GST rate for economy class tickets isn’t really extreme. But, it is beneficial for frequent travelers who are on a budget. But, business class travelers will have to shell out more than before. Let’s understand the GST rates for business class tickets and impact of GST on air travel with a comparison.

 

GST on Air Travel, Airlines, GST impact on air ticket prices

 

So the price for business class ticket under GST is more than the price under Service Tax. There’s a hike of Rs. 475. The GST rate for business class tickets is surely a dampener. However, good news is, as per GST provisions all guests traveling for business can claim their GST benefits. They simply have to register once on their airline’s website and provide relevant details. After this, they will receive a GST invoice which will allow them to claim the input GST paid for the ticket. This may help to forget the otherwise mildly harsh impact of GST on air travel.

GST on In-flight services provided by Airlines

Ancillary products or services are the services or products that the airline provides to the traveler, example excess baggage, food or snacks. The GST on these services will depend on class of travel of the airplane ticket. GST on in-flight services will be the same as the GST on the plane ticket.

For example, if Mr. A travels by business class and calls for a meal, the GST on meal will be 12%. This is because GST on business class/first class tickets is 12%. Similarly, if Mr. B has economy class ticket and his luggage exceeds the baggage allowance, he will have to pay for the same. Here, GST on excess baggage will be 5%, since Mr. B has an economy class ticket.

GST on cancellation of tickets

Air carriers have their own rules regarding cancellation of tickets. Some have an upper limit as to the amount they will refund while some have a stipulated time period within which travelers can cancel the tickets. Either ways, an 18% GST will be applicable on cancellation of tickets. This GST rate on ticket cancellation is the same for any class of travel. The Service Tax on ticket cancellation was 15%.

Conclusion:

Many economic travelers opt for low-cost domestic carriers. Firstly (and obviously) because they’re low cost and GST Return Filing, GST Impact on Airlinessecondly because they offer discounts. The 5% GST on economy class tickets may be marginally lower than the 6% Service Tax but the frequent fliers are happy. Moreover, airlines can claim input credit for the GST paid on input services for the economy class. This will further lead to reduction in prices.

The 12% GST on premium class tickets may be a negative. However, for premium class tickets, airlines can claim credit for inputs such as spare parts and food items.

In conclusion, we can only suggest you to think more than twice before booking tickets for that getaway. Happy holidays!