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Economy class air travel set to become cheaper from July 1

Press Trust of India  |  New Delhi 

Economy class air travel will become cheaper with rate fixed at 5 per cent against the existing 6, under the upcoming regime from July 1.

However, for those travelling business class, tickets will become dearer as the will go up from 9 per cent to 12 per cent.

Industry experts say that today's announcement is in line with the government's aim to make flying affordable for the masses.

"Government's decision to levy 5 per cent and 12 per cent for economy and business class is a very good decision which will continue to support affordable fare regime in The was sensitive to the impact of higher slab on industry and the consumer is significantly positive," according to Sydney-based aviation think-tank CAPA Centre of Aviation.

The Council finalised four rates of 5, 12, 18 and 28 per cent to apply on services including telecom, insurance, hotels and restaurants.

CAPA also said that this is likely to further boost domestic aviation traffic, where is at the third spot.

India's domestic air passenger traffic stood at 100 million in 2016 and was behind only to the US (719 million) and China (436 million).

"Expect high growth rate in domestic traffic to continue in the near-term with further upside once the impact on the economy is visible in 1-2 years," it added.

The sentiment was echoed by travel portal Yatra.Com.

"Overall, this seems like a good move for the sector and should help the growth momentum continue. Economy airfare will get marginally cheaper which should drive continued passenger growth in the air market, while business class will see a moderate increase," Sharat Dhall, COO, Yatra.Com.

The 5 and 12 per cent rates come as a huge relief for the industry, which had expressed concern over the draft law released last year pegging rate at 17 per cent to 18 per cent. This, as per a PwC study, would have led to a 9 per cent to 12 per cent increase in the cost of air travel for passengers.

A reason for keeping on passenger travel low is because airlines cannot claim credit on aviation turbine fuel under the regime.

Currently, airlines can claim what is called a cenvat credit on the central excise duty for fuel. They will now lose as petroleum products, including ATF, are outside the purview of

However, purchase of aircraft not meant for personal use, has been put under the highest slab of 28 per cent. This will also invite an additional cess of 3 per cent.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Fri, May 19 2017. 21:48 IST