GST on foreign air tickets breaks international norms: IATA chief

New Delhi: Levying GST on overseas air tickets violates international norms and also weakens the competitiveness of carriers, International Airport Transport Association (IATA) chief Alexandre de Juniac said on Tuesday. He also flagged various concerns about the Indian aviation sector, including high jet fuel prices, infrastructure woes and privatisation of airports.

The IATA is a grouping of more than 280 airlines. Air India, Jet Airways and Vistara are also members. Speaking at a conference here, de Juniac said goods and services tax (GST) on international air tickets violates International Civil Aviation Organization (ICAO) norms and also weakens the competitiveness of carriers.

The ICAO, part of the UN, is a global aviation body. The GST rate is 5 per cent and 12 per cent on economy and business class tickets, respectively. The IATA's Director General and CEO also said that India's aviation sector is projected to see 500 million trips "to, from and within" by 2037.

India's civil aviation sector has recorded 50 months of double-digit growth and it can be "very easily maintain (that) for next 50 months, provided that all nuts and bolts are in place", Civil Aviation Secretary R N Choubey said.

Junica added that the Indian Government's policies are imposing "excessive costs" on airlines in India and infrastructure constraints are limiting growth, even as he projected the country's aviation sector to register 500 million passengers by 2037.

The head of the IATA, a grouping of more than 280 airlines, also said the steep rise in fuel prices and fall in the rupee value are putting "acute pressure on profits" of airlines. Air India, Jet Airways and Vistara are also IATA members.

In India, infrastructure constraints limit growth while government policies impose excessive costs, he added.

"If we can comprehensively fix jet fuel and infrastructure issues, India will be primed to take a giant step forward in the world of aviation," he said at a conference here.

"We have long made our case that applying GST to international tickets violates ICAO principles and India's international obligations," de Juniac said. Further, he said these deviation from global standards may have a short-term revenue benefit for the government but it weakens India's competitiveness by raising the cost of connectivity.

The ICAO is a global aviation watchdog. At present 5 per cent and 12 per cent Goods and Services Tax (GST) are levied on economy and business class air tickets, respectively. While fuel accounts for about 24.2 per cent of an average airline's cost structure, the IATA chief said that in India, it is 34 per cent and pitched for regulating "transparency in pricing of jet fuel".

"All airlines are suffering from the rise in fuel prices. And India's regulatory and tax framework around fuel hits airlines serving this market even harder," he noted.

There is no real competition for fuel suppliers at airports and hence there is little incentive to keep prices competitive, he said, adding that on domestic flights, "fuel is subject to excise duties and state taxes of up to 30 per cent".

"The lack of competition in fuel and lack of true open-access to on-airport fuel infrastructure is strangling the lifeblood from the airlines. "If you kill the goose that lays golden eggs, there are no more eggs!," de Juniac

said.