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`12 pc service tax on air travel will hit revenue'

Ashwini Phadnis

Passengers may resort to cross border ticketing

New Delhi , March 10

The international airline industry has warned the Government that the implementation of 12 per cent service tax on first and business class travel could lead to a revenue loss to the country.

"The implementation of the decision could encourage cross border ticketing. Passengers may be tempted to get their tickets issued abroad so as to save on the huge taxes that they would have to pay for first and business class travel if the tickets are issued in India,'' a senior airline official said.

In Budget 2006-07, the Finance Minister, Mr P. Chidambaram, has proposed imposing a service tax of 12 per cent on international air travel in business and first class.

Industry view

Informal consultations on the proposed service tax have begun between the heads of various airlines and a formal industry view on its imposition is expected on March 22 after the Board of Airline Representatives (BAR) meets. "It is very likely that a formal representation seeking a review will be made to the Government after the BAR meeting,'' an airline official said.

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