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8 Sep 2016

Low rate of tax on passenger travel by air from/to Regional Connectivity Scheme Airport

Earlier, abatement of 60% was available for the service of Transport of passengers by air subject to a condition that CENVAT credit of Inputs and capital goods is not available. Recently to promote travel from/to Regional Connectivity Scheme Airport, Central Government vide Notification 38/2016-ST has increased the rate of abatement from 60% to 90% for the transportation of passengers by air, embarking from or terminating in a Regional Connectivity Scheme Airport i.e. the rate of service tax decreased from 6% (15 X 40%) to 1.5% (15 X 10%) subject to the condition that along with CENVAT credit of inputs and capital goods which was not allowed earlier as well, the CENVAT credit of input services will also not be available.

Further, the benefit of higher rate of abatement is valid only for a period of one year from the commencement of operations of the Regional Connectivity Scheme Airport as notified by the Ministry of Civil Aviation.

Regional Connectivity Scheme is one of the Pradhan Mantri Yojna Scheme, which is an initiative to promote affordable flying and thus increase the air connectivity as well. Under the regional connectivity scheme the government will make flying much cheaper so that more and more passengers avail flights especially from unserved airport, so that air connectivity is utilized and expanded and ultimately more employment at the smaller airports can be generated.