Business, premium eco flight tickets to cost more on higher GST rate from Sep 22

New Delhi/Mumbai, Sep 4 (PTI) Travellers will have to shell out slightly more money for premium, business and first class flight tickets as higher GST rates will be applicable from September 22.

In a major revamp, the GST Council, on Wednesday, finalised a two-rate structure of 5 per cent and 18 per cent. The move will bring down the prices of a large number of products and services, including common-use items.

With respect to airlines, the Goods and Services Tax (GST) for non-economy class tickets has been increased to 18 per cent from the current level of 12 per cent. The rate, with Input Tax Credit (ITC), will be effective from September 22.

"... if travel is by economy class, then the rate of GST is 5 per cent otherwise, the GST rate will be 18 per cent," the government said on Wednesday.

The GST on economy class tickets remains unchanged at 5 per cent.

Amid the rising air traffic and travellers seeking a better flying experience, airlines are also looking to expand their premium offerings. In recent years, there has also been good traction for premium economy class seats.

Experts are of the view that the higher GST for premium air tickets might push more travellers to opt for economy class travel.

Karan Agarwal, Director at travel firm Cox & Kings, said the higher GST on premium airfares may shift some demand towards economy cabins, but it also opens room for operators to rethink value-driven premium offerings.

"For the industry, this is not just about price correction, it's about recalibrating experiences, reimagining itineraries, and ensuring that travel remains aspirational yet accessible," he said in a statement.

Jitin Makkar, Senior Vice President and Group Head of Corporate Sector Ratings at rating agency ICRA, said in a statement that the increase in GST rate should not have a significant impact on the business class segment, considering this segment's low price elasticity, though there could be some amount of downtrading to the economy segment.

Sheldon Hee, Regional Vice President for Asia Pacific at global airlines' grouping IATA, on Thursday said tax on non-economy air travel has risen dramatically – GST is at 18 per cent after yesterday's announcement, compared to the 8.6 per cent rate in 2017 under the service tax regime.

In a statement, he mentioned that in many ways, India has been an amazing aviation story with its impressive growth, record aircraft orders and world-class infrastructure.

"Aviation has tremendous potential to contribute to India's economic growth, both directly as Indian airlines grow, and indirectly through increased connectivity for travellers and businesses alike. It is therefore disappointing to hear of a decision to increase the GST on non-economy travel with no clear justification," he said. PTI RAM IAS SHW