IATA terms service tax on air tickets illegal

The International Air Transport Association (IATA) has termed the service tax charged on air tickets by the Indian government as illegal according to the Chicago Convention.

“According to the Chicago Convention, service tax on air tickets charged by the Indian government is illegal. India is a signatory to the convention and it cannot charge service tax on tickets,” said Giovanni Bisignani, director general and chief executive officer, IATA.

Union Finance Minister Pranab Mukherjee in this year’s Budget announced to charge 10.38 per cent service on both international and domestic air tickets. Before this announcement, service tax was charged only on first class tickets in the international sector.

After opposition from the recession-hit aviation industry, the finance ministry brought it down to Rs 100 for domestic and '500 for international air tickets.

Both the domestic and international airlines are charging service tax on the tickets from July 1, 2010.

Speaking on the sidelines of a conference on Challenges of Indian Aviation supported by the Confederation of Indian Industry (CII), Bisignani said he had raised the matter with Deputy Chairman of the Planning Commission Montek Singh Ahluwalia.

“He (Montek) told us that the charge has been announced by the finance ministry and we will be meeting the finance ministry soon to raise this issue,” Bisignani added.

On another question on the yield of the airlines globally, Bisignani said the yields have increased from the recession level but is still around eight per cent lower than the pre-crisis levels of 2008. “Though we have not done any calculation on it but we felt it would reach the pre-recession level by 2012,” he said.

On the sidelines of the same function, Kingfisher Airlines Chairman Vijay Mallya said the company does not have any overdues to oil marketing companies.