IATA APPEALS TO EXEMPT INTERNATIONAL AIR TICKETS FROM SERVICE TAX

Glob­al air­lines body IATA today made an appeal to the gov­ern­ment, among oth­ers, to exempt inter­na­tion­al air tick­et from ser­vice tax, for ease of doing busi­ness here, even as the Civ­il Avi­a­tion Min­istry said there were dif­fer­ent laws and reg­u­la­tions in dif­fer­ent countries.

“The appli­ca­tion of Ser­vice Tax should be aligned with a prin­ci­ple that it does not apply to ser­vices ren­dered out­side of India includ­ing those for over­flight charges, glob­al dis­tri­b­u­tion sys­tems, extra bag­gage fees and inter­na­tion­al tick­ets,” IATA Direc­tor Gen­er­al and CEO, Tony Tyler said.
He was deliv­er­ing a keynote address at the Avi­a­tion Day con­fer­ence organ­ised by Inter­na­tion­al Air Trans­port Asso­ci­a­tion (IATA), busi­ness umbrel­la body Con­fed­er­a­tion of Indi­an Indus­tries (CII) and the Min­istry of Civ­il Avi­a­tion here.

The con­fer­ence was attend­ed by a host of senior air­lines exec­u­tives, offi­cials from the Civ­il Avi­a­tion Min­istry and Direc­torate Gen­er­al of Civ­il Avi­a­tion, as well as avi­a­tion indus­try experts.

In his speech, Union Civ­il Avi­a­tion Min­is­ter Ashok Gajap­athi Raju said there were dif­fer­ent laws and reg­u­la­tions in dif­fer­ent coun­tries and India would have to devel­op its own, keep­ing in mind the pre­vail­ing circumstances.

Observ­ing that there was a need to fol­low inter­na­tion­al treaties that pro­tect air­lines from dou­ble-tax­a­tion on income, Tyler sug­gest­ed that the incom­ing GST regime should also “zero-rate inter­na­tion­al air trans­port ser­vices in line with OECD (Organ­i­sa­tion for Eco­nom­ic Co-oper­a­tion and Devel­op­ment) guidelines.”

Point­ing out that already avi­a­tion and avi­a­tion-relat­ed tourism sup­port sev­en mil­lion Indi­an jobs and USD 23 bil­lion of Indi­a’s GDP, that is just 100 mil­lion peo­ple trav­el­ling by air this year to and from with­in India, Tyler said the healthy growth of the sec­tor has the poten­tial to expand these ben­e­fits tremendously.

“We see the poten­tial for that to increase to near­ly 280 mil­lion by 2029, by which time India would hold the rank of the world’s third largest mar­ket, and by the end of our fore­cast peri­od in 2034, we see a fur­ther rise to 360 mil­lion pas­sen­gers. That amaz­ing growth will bring even more ben­e­fits to Indi­a’s devel­op­ment,” Tyler said.

“But there are immense chal­lenges which must be over­come as seen in the sec­tor’s finan­cial per­for­mance. While demand growth is robust and some air­lines are gen­er­at­ing prof­it, sec­tor-wide loss­es for India are still expect­ed to exceed USD 1 bil­lion this year,” he said.
Oner­ous reg­u­la­tion and process­es, debil­i­tat­ing tax­es and expen­sive infra­struc­ture are hold­ing back the indus­try’s abil­i­ty to deliv­er greater eco­nom­ic ben­e­fits to India, Tyler said.

He said the need to avoid dou­ble-tax­a­tion with­in India “in sit­u­a­tions where air­lines are effec­tive­ly taxed on tax­es collected.”

India needs smarter reg­u­la­tion, he said, adding, this essen­tial­ly means tak­ing a busi­ness-like approach to reg­u­la­tion using com­mon sense and proven principles.
In a bid to slash air­port charges, Tyler also urged the gov­ern­ment to “over­come legal chal­lenges which pre­vent AER­A’s rec­om­men­da­tion for a 78 per cent reduc­tion in Del­hi’s air­port charges from being implemented.”

He empha­sised the need for allow­ing the Air­ports Eco­nom­ic Reg­u­la­to­ry Author­i­ty (AERA) to do its work “inde­pen­dent ..
“Reg­u­la­tion is also hold­ing back the devel­op­ment of the sec­tor. Well-inten­tioned reg­u­la­tions, but which are incon­sis­tent with glob­al stan­dards, make doing busi­ness in India very dif­fi­cult for the air­lines. India impos­es rules and require­ments that are not seen any­where else,” Tyler said.
To bring down costs of the domes­tic avi­a­tion sec­tor, Civ­il Avi­a­tion Sec­re­tary R N Choubey said the min­istry is open to var­i­ous avenues includ­ing the pos­si­bil­i­ty of car­ri­ers pool­ing their orders for aircraft.

Oth­er options could be declar­ing air­craft pur­chase as an infra­struc­ture activ­i­ty, which would mean that costs relat­ed to the pur­chase would be low­er, he said.

“We will make all efforts to ensure that ATF prices are kept as cheap as pos­si­ble,” he said, adding, as part of efforts to improve the ease of doing busi­ness for avi­a­tion play­ers, the min­istry is look­ing to do away with the cur­rent norm that require enti­ties to seek pri­or per­mis­sion before import­ing aircraft.

Vis­tara chief exec­u­tive Phee Teik Yeoh appre­ci­at­ed the min­istry’s stand to include the views of the indus­try to fig­ure out imped­i­ments, going forward.
“I think they have tak­en nec­es­sary steps and tak­en a more con­sul­ta­tive approach in recent times, which is a good sign,” he said, adding, any pol­i­cy which is there has to be sustainable.

Vis­tara, as a respon­si­ble air­line, sup­ports the gov­ern­ment on its objec­tive of pro­vid­ing air con­nec­tiv­i­ty to the remote regions, he said.