Govt withdraws service tax exemption for greenfield airports

Project costs of Navi Mumbai, Goa airports to go up

The government has withdrawn service tax exemption provided to construction of greenfield airports. This will make construction of new airports at Navi Mumbai and Goa more expensive.

In his budget speech finance minister Arun Jaitley announced the withdrawal of exemption to construction, erection, commissioning or installation of original works pertaining to an airport or port.

"Till now there was an exemption on paying service tax in construction of greenfield airport. With the exemption withdrawn developers would have to pay tax on consultancy, technical services or hiring of labour from contractors. This could push up the construction costs by as much as 4%," remarked a senior executive from a private company engaged in airport development.

Last November minister of State for Civil Aviation Mahesh Sharma told the Rajya Sabha, "Government has granted in principle approval for setting up 15 greenfield airports in the country. Timeline for construction of airport projects depends upon many factors such as land acquisition, availability of mandatory clearances, financial closure by the respective promoter ." The minister listed out Mopa, Navi Mumbai, Shirdi and Sindhudurg as among the airports that will be developed as greenfield facilities.

"Disappointing day for aviation. Its as if aviation is not even a consideration. Its wrong image as a 'playground of the rich' makes it a low priority item. The beleaguered industry's long pending expectations of tax rebates on ATF, MRO, airports and general aviation have been ignored yet again. Higher Service Tax will enhance airfares. Loss of MRO revenue, jobs and taxes to Sri Lanka, ASEAN and gulf countries will continue. India's troubled aviation sector will continue to struggle for another year", says Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG.