Civil Aviation Minister Praful Patel recently informed the Lok Sabha that Service Tax on air travel has been imposed on international air travel for a passenger embarking in India and travelling in higher (other than economy) classes with effect from May 1, 2006. Vide the Finance Act, 2010; Service Tax on air travel was expanded to cover international travel (economy class) and domestic travel. The rates of Service Tax on air travel are as under:
Service Tax on domestic passenger transport services at the rate of ten per cent of the gross value or Rs 100 per trip, whichever is lower is levied. The journey to/from airports situated in the states of Assam, Meghalaya, Manipur, Mizoram, Tripura, Nagaland, Arunachal Pradesh, Sikkim and Bagdogra in West Bengal are exempted.
Air Transport Service to international passenger travelling in Economy Class and embarking in India at the rate of ten per cent of the gross value or Rs 500 per trip, whichever is lower.
The following services at the airports have been kept free from Service Tax:
Certain basic activities undertaken within airports have been kept out of the tax such as (a) supply of water, (b) supply of electricity, (c) treatment of persons by a dispensary, hospital, nursing home or multi-specialty clinic (except cosmetic or plastic surgery service), (d) services provided by a school or centre to provide formal education other than those services provided by commercial coaching or training centre, (e) services provided by fire service agencies and (f) pollution control services from the whole of the Service Tax leviable thereon under section 66 of the finance Act.
Commercial and Industrial construction services in relation to airport.
Abatements to certain services such as 'Renting of a cab', Commissioning and Installation Services, Goods Transport Agency service and certain construction services would be available when provided wholly within an airport under the new definition of airport services.
Warehousing of agriculture products and cold storage facilities under Storage and Warehousing Service, transport of export goods in an aircraft by an aircraft operator and site information and clearance, excavation and demolition services etc., when provided in the course of construction of airport.