June 30, Friday : Airlines are demanding better deals under the Goods and services regime for economy class citing that business and first class have got much better deal with input tax credit, or the deductions for taxes paid on various inputs.
The council has decided 6% to 5% tax for economy class but carrier companies are asking for more better deals according to TOI.
Under the existing single tax regime, airlines can claim ITC only on their input services i.e goods (aircraft, spares) and services (catering, ground handling, aircraft leasing).
So, the 18 percent levied on catering and the 5% paid on aircraft lease rental can be reduced from the 5% GST on economy class fare, but not the basic customs duty and 5% GST paid on importing aircraft and spares.
The GST council has excluded aviation turbine fuel (ATF), which attracts around 40% of an airline’s operating cost and there is no tax credit on it.
Presently, carrier companies pay zero tax on import of goods (aircraft and aircraft spares) , but after implementation of GST , the tax on an Airbus A320 worth $50 million will fall down to $2.5 million.
While For a Boeing 787, which costs around $130 million, it will attract $6.5 million tax, a senior airlines official told TOI.
However, without full ITC on medium class, the low-cost airlines would be severely impacted.
Alexandre de Juniac, director general of International Air Transport Association (IATA), has sent a letter to the finance minister Arun Jaitley , asserting thatIndian carriers are concerned that ITC restrictions on economy class might favour international carriers that usually have more premium seats.