Airlines may increase fares to offset higher taxes on imported spares and leases under the new GST framework, despite initial hopes for cuts.
Potential Impact of GST on Air Travel Fares
In an update from June 13, 2017, the GST Council initially indicated that economy class air travel prices would decrease. However, recent developments within the aviation industry suggest that this might not be the case. Airlines are reportedly considering raising ticket prices to compensate for the increased operational expenses incurred during the transition to the new Goods and Services Tax system.
The GST regime mandates that airlines pay extra taxes on imported spare parts and on aircraft lease rentals. Given the already narrow profit margins characteristic of the aviation sector, these additional tax burdens could necessitate an upward adjustment in ticket prices.
This potential fare hike was highlighted in a report by The Economic Times.
