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Aviation Sector Could Raise Fares Due to GST Implementation Expenses

Initial announcements from the GST Council suggested a reduction in economy airfares. However, the aviation sector is now contemplating increasing ticket prices. This adjustment aims to offset higher operational costs, including additional taxes on imported spares and aircraft lease rentals under the new GST framework, impacting the industry's already slim profit margins.

📖 1 min read read🏷️ GST Impact on Aviation

Potential Impact of GST on Air Travel Fares

In an update from June 13, 2017, the GST Council initially indicated that economy class air travel prices would decrease. However, recent developments within the aviation industry suggest that this might not be the case. Airlines are reportedly considering raising ticket prices to compensate for the increased operational expenses incurred during the transition to the new Goods and Services Tax system.

The GST regime mandates that airlines pay extra taxes on imported spare parts and on aircraft lease rentals. Given the already narrow profit margins characteristic of the aviation sector, these additional tax burdens could necessitate an upward adjustment in ticket prices.

This potential fare hike was highlighted in a report by The Economic Times.

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Frequently Asked Questions

What is Goods and Services Tax (GST) in India?
GST is an indirect tax in India that has largely replaced many other indirect taxes. It is levied on the supply of goods and services.
How does GST affect businesses?
GST simplifies the tax structure, reduces the cascading effect of taxes, and aims to create a common national market. Businesses need to register, file returns, and comply with input tax credit rules.
What is Input Tax Credit (ITC)?
Input Tax Credit allows businesses to claim credit for the GST paid on purchases of goods and services that are used for business purposes. This reduces their overall tax liability.
Are all goods and services subject to GST?
While most goods and services are covered under GST, some are exempt, and different items fall into various tax slabs (0%, 5%, 12%, 18%, 28%) based on their nature.
What is the role of the GST Council?
The GST Council is the governing body for GST in India. It makes decisions on GST rates, rules, and procedures, comprising the Union Finance Minister and state finance ministers.

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