Service tax on air travel

New Delhi: The Finance Act, 2006, imposed service tax on those embarking in India for international travel in a class other than the economy class. From an analysis of the definition of the taxable service relating thereto, it can be seen that the intent is to tax international travel and not domestic travel.
Further, the objective is to only tax international travel in a class other than economy class. The Central Board of Excise and Customs’s (CBEC’s) Circular No 85/3/2006-ST, dated October 17, 2006, relates to the taxability of several situations arising from international air travel.
At the outset, it must be stated that the definition of economy class, so as to provide for its exclusion from the levy, is a narrow one and does not accord with the commonly understood meaning of the term as is prevalent in commercial parlance.
15/01/07 S Madhavan/Business Standard

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