The Indian budget for 2011-12 has raised the cost of air travel by imposition or raising of service tax.
Earlier this morning, the Indian Finance Minister, Mr. Mukherjee, announced that the service tax on air travel by economy class would be raised by Rs. 50 for domestic trips and by Rs. 250 on international.
Domestic business and first class passengers will feel a significant impact since the minister has announced imposition of service tax at the standard rate of 10%, as is currently charged on international premium class air travel.
The three legacy carriers, Air India, Jet Airways and Kingfisher Airlines offer domestic premium class services. Kingfishers probably places the highest emphasis on its premium class passengers.
While this steep increase on costs for domestic premium class will have an impact, the degree of impact remains to be seen. Since most domestic premium class passengers travel on the company account, it is altogether possible the additional costs will just get passed on the corporate travel expense account.