Air fares to rise due to service tax

From 1st July, there will be no service tax on construction of low-cost housing, power distribution and some other services. However, domestic and international air fares will rise by Rs100 and Rs500, respectively, with the government issuing a notification to bring air travel into the service tax ambit.

Starting next month, there will be no service tax on construction of low-cost housing, power distribution, foreign travellers in transit, those flying to and from the Northeast, services within ports and airports, and certain tournaments and championships, reports PTI.

On the other hand, domestic and international air fares would rise by Rs100 and Rs500 respectively from 1st July with the government issuing a notification to bring air travel into the service tax ambit.

"The notification shall come into force on 1st July," the Central Board of Excise and Customs (CBEC) today said in several notifications related to separate areas issued to enforce the provisions of the Finance Act 2010.

Low-cost housing under the Jawaharlal Nehru National Urban Renewal Mission and the Rajiv Awas Yojana has been exempted from service tax beginning 1st July. The government also exempted certain services that are provided within ports and airports from tax.

"Repair of ships or boats or vessels belonging to the government of India, including the Navy or the Coast Guard or the Customs, but does not include government owned public sector undertakings," the CBEC said as to the services exempted from tax.

Other services within ports and airports that have been exempted from tax are supply of water, supply of electricity, medical treatment, formal education, fire service agencies and pollution control services.

The finance ministry exempted the taxable services provided to any person by another person authorised to distribute power under the Electricity Act 2003 for power distribution. Besides, tax exemption has been allowed to tournaments and championships organised by certain bodies such as national sports federations or federations affiliated to it, School Games Federation of India, Association of Indian Universities and Para-Olympic Committee of India, among others.

The government also exempted foreign travellers from service tax if they are in transit to a different country without passing the immigration and customs area.

People employed or engaged by the aircraft operators in any capacity on board the aircraft have also been exempted.

Further, those flying to and from the North-eastern states-Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Baghdogra (in West Bengal)-have also been exempted from service tax.

However, the finance ministry has postponed the exemption of service tax in relation to transport of specified goods by railroads. The exemption, which was earlier delayed to 1st July from 1st April, has now further been delayed till January, 2011.

The government had proposed in the 2010-11 budget that 10% service tax be charged on air travel aiming at raising Rs600 crore and Rs1,000 crore annually.

It had proposed to expand the scope of air transport services to attract service tax to include domestic journeys and international journeys in any class.

The notification, issued by the Department of Revenue on Tuesday, said that for domestic travel, "10% of the gross value of ticket or Rs100 per journey, whichever is less" would be charged from passengers travelling in any class, business or economy.
   
For international journey, it would be "10% of the gross value of the ticket or Rs500 per journey, whichever is less, for passengers embarking in India for an international journey in economy class."

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COMMENTS

rama

6 years ago

I am undertaking a journey from chennai to London and would be reaching delhi on 5th July,2010. Do I have to pay service tax at the time of reaching delhi as per thenew service tax rule

Capital markets not ready yet for financial inclusion: Bhave

"We must first understand the term financial inclusion, as defined by the Reserve Bank. It is different for banks and mutual funds. When we talk of banks, it means to include the poorest of the poor...but that can't be same for MFs," SEBI chief CB Bhave told a mutual fund summit in Mumbai on Wednesday

Even though financial inclusion is the new buzz word in the financial services sector, Securities and Exchange Board of India (SEBI) chairman CB Bhave feels that the country is not ready yet for the same in the equities markets, reports PTI.

"We must first understand the term financial inclusion, as defined by the Reserve Bank of India (RBI). It is different for banks and mutual funds (MFs). When we talk of banks, it means to include the poorest of the poor...but that can't be same for MFs," Mr Bhave told a mutual fund summit in Mumbai on Wednesday.

Taking a dig at MFs, Bhave said MF players should not get involved in a rat race to sell or mis-sell their products and should first understand who their target customer is.

"Financial inclusion is a noble goal and everyone should be working towards achieving it, but one must keep in mind the target customer. A person whose lifetime saving is a mere Rs50,000 can't afford to invest in MFs. If the market crashes tomorrow, he cannot take that kind of risk. You will only give him what the net asset value (NAV) is at that particular time," Bhave said.

Meanwhile, global advisory firm PriceWaterhouseCoopers (PWC), in a report has stressed that there is tremendous growth opportunity for mutual funds as the penetration level in smaller towns is lagging behind urban centres.

Quoting the National Council of Applied Economic Research (NCAER) 2008 Survey, PWC said as much as 65% of the savings are with banks or post offices, 23% are invested in real estate and gold, only 12% are channelized towards financial instruments.

"Only 12% of the savings are invested in financial instruments. This manifests tremendous opportunity for growth in mutual funds," it added.

It also attributed the growth opportunity to rising disposable incomes in Tier II and III cities.

It also stressed that the industry should come out with better plans and innovative products that would offer a higher rate of return, transparency and freedom to select products of their choice.

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Monsoon 11% below normal: IMD

The southwest monsoon, which is nearly 10 days behind its normal schedule over north India, is expected to strengthen with the formation of a low-pressure area in the Bay of Bengal

India received 11% less rains than normal for the June 1-23 period even as the south-west monsoon, which has been virtually stationary for the past week, showed signs of advancing northwards, reports PTI.

The weather office said that the country received 97.4 mm rainfall for the June 1-23 period as against the normal levels of 109.6 mm.

However, weather scientists have said that there was no need for alarm as there was still hope for improvement in rainfall across the country.

The southwest monsoon, which is nearly 10 days behind its normal schedule over north India, is expected to strengthen with the formation of a low-pressure area in the Bay of Bengal.

"Conditions are becoming favourable for further advance of southwest monsoon into parts of Bihar, Chhattisgarh, Madhya Pradesh and some parts of east Uttar Pradesh during next 3-4 days," the weather office said.

Since their onset on 31st May, monsoon rains have made staggered progress and stopped in the tracks due to cyclone 'Phet', delaying their advance by at least 10 days to the breadbasket northern region, as well as central and north-western parts of the country, which mainly grow oilseeds.

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