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Published on:
February 25, 2023
By
Paramita

Airlines May Increase Ticket Prices To Cover GST Costs

The introduction of the Goods and Services Tax (GST) in India has had far-reaching effects on businesses in various sectors. One of the sectors that is likely to be affected the most is the aviation industry. The GST is a comprehensive tax reform that aims to bring all indirect taxes under a single tax regime. The aviation industry has been impacted by the GST, as it has led to an increase in the cost of operations. This, in turn, is expected to result in an increase in airline ticket prices for passengers.

The GST, which came into effect on July 1, 2017, replaced a host of indirect taxes such as excise duty, service tax, and value-added tax (VAT). The aviation industry is subject to a number of taxes, including excise duty, VAT, and service tax. Under the GST, all these taxes are subsumed into a single tax, which is expected to simplify the tax structure and reduce the overall tax burden for businesses.

However, the aviation industry has been hit hard by the GST, as it has led to an increase in the cost of operations. This is because aviation turbine fuel (ATF), which is used to power aircraft, is subject to the highest rate of GST, which is 28%. Prior to the introduction of the GST, ATF was subject to a range of taxes such as excise duty and VAT, which varied from state to state. The multiple taxes led to a complex tax structure that was difficult to navigate for airlines.

Now, with the introduction of the GST, the tax burden on airlines has increased significantly. As a result, airlines are likely to pass on the increased cost to passengers in the form of higher ticket prices. This is likely to impact both domestic and international air travel, as airlines seek to cover the increased cost of operations.

The increase in ticket prices is likely to be felt by passengers across all segments, including business and leisure travelers. The higher ticket prices are expected to impact demand for air travel, as passengers may opt for other modes of transport such as trains or buses.

However, the increase in ticket prices may not be uniform across all airlines. Some airlines may absorb the increased cost of operations by cutting costs in other areas, while others may pass on the increased cost to passengers. The impact of the GST on airline ticket prices is likely to vary depending on the airline and the route.

In conclusion, the introduction of the GST has had a significant impact on the aviation industry in India. The increase in the cost of operations is likely to result in an increase in airline ticket prices for passengers. The impact of the GST on ticket prices is likely to vary depending on the airline and the route. Passengers should be prepared for higher ticket prices in the coming months.

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Updated on:
March 16, 2024