India Imposes Service Tax On Domestic Flights

by Mary Swire, Tax-news.com, Hong Kong

13 August 2010

The Indian government has imposed a service tax on economy class international air travel and on domestic routes. The tax was already imposed on passengers embarking in India and travelling in higher than economy class.

In accordance with the Finance Act, 2010, service tax on air travel has been extended to cover international travel (economy class) and domestic travel.

The rates of service tax on air travel are as follows:

• Service tax on domestic passenger transport services is at the rate of 10% of the gross value or INR100 (USD2.14) per trip, whichever is lower. Journeys to/from airports situated in the states of Assam, Meghalaya, Manipur, Mizoram, Tripura, Nagaland, Arunachal Pradesh, Sikkim and Bagdogra in West Bengal are exempted; and
• Service tax on international passengers travelling in economy class and embarking in India is at the rate of 10% of the gross value or INR500 per trip, whichever is lower;

Certain activities undertaken within airports are still exempt from the tax, including:

• Supply of water;
• Supply of electricity;
• Treatment of persons by a dispensary, hospital, nursing home or multi-speciality clinic (except cosmetic or plastic surgery service);
• Services provided by a school or centre to provide formal education other then those services provided by commercial coaching or training centre;
• Services provided by fire service agencies;
• Pollution control services;
• Commercial and Industrial construction services in relation to airports;
• Renting of a cab, installation services, goods transport agency services and certain construction services, when provided wholly within an airport under the new definition of airport services; and
• Warehousing of agriculture products and cold storage facilities under storage and warehousing services, transport of export goods in an aircraft by an aircraft operator and site information and clearance, excavation and demolition services etc., when provided in the course of construction of airport.

The information was presented by Minster for Civil Aviation, Shri Praful Patel, to the Indian parliament.

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