You may have to shell out more while booking flights after GST rollout

Here’s some bad news for flyers: Flight tickets may become costlier after the rollout of Goods and Services Tax (GST).

The GST is going to increase the operational cost and it is likely the airlines will increase the fares.

"Under GST, airlines will be taxed for importing spares for their use and on aircraft lease rentals, and these are not being taxed in the current regime. Any new tax on the aviation industry, which operates under thin margins, may drive fares higher,” a senior airline executive told ET.

Apart from increase in tax incidence, airliners are also worried about reductions in input tax credits on revenues earned through economy class seats.

"Regarding input tax credits (ITC), the lower rate of 5% on economy class travel comes with restrictions, whereby ITCs can be claimed on input services. ITCs are not claimable on the purchase of good or stock transfer,” Alexandre de Juniac, director general of global industry grouping IATA, wrote in a letter to finance minister Arun Jaitley.

Besides, GST is likely to make direct flights to several international destinations costlier.

"The first leg of the flight may be Delhi-Dubai for a passenger flying to the US via Dubai, but an Indian airline like Air India that flies directly to the US has to charge GST for the full ticket until the US, making it expensive for the passenger booking a direct flight, thus, making it difficult for Indian carriers,” another airline executive, who did not want to be identified, told ET.