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Goodbye to cheap air travel after Budget?

Press Trust Of India
Feb 26, 2010 at 05:14pm IST

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New Delhi: Air travel on all classes in both domestic and international sectors is likely to become costlier with the government expanding the scope of air transport services to attract service tax.

"The scope of air passenger transport service is being expanded to include domestic journeys and international journeys in any class," said the memorandum explaining the provisions of the 2010-11 Finance Bill, presented by Finance Minister Pranab Mukherjee in Parliament on Friday.

So far, service tax was imposed only on international travel on First and Business classes. The government, however, has proposed to exclude from the taxable value the statutory taxes charged by foreign governments, it said, indicating airport taxes charged at foreign destinations.

BOOK TICKETS: Airline may pass on the burden of fresh tax to passengers.

The definition of 'airport services' was also being amended to include all services provided within the airport premises. An authorisation from the airport authority "would not be a pre-condition for taxing these services", it said.

The Finance Minister also announced that rate of tax on services will be retained at 10 per cent and added that certain services hitherto untaxed would be brought within the purview of service tax levy. These services will be notified separately, he said.

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