Service tax on air travel not to impact adversely: FM

Finance Minister Pranab Mukherjee on Thursday said service tax on air travel will not have any adverse impact as it is not linked to fare and has been capped at Rs 100 for domestic travel and Rs 500 for international travel.

The minister, in his reply to the Finance Bill debate, said that he received complaints from various quarters saying the levy would adversely affect the civil aviation sector and would make air travel prohibitive.

"I would like to clarify that it would not be so. It would not be linked to the percentage of the fare," he said.

The effective rate of levy, when they come into effect, would be a maximum of Rs 100 per travel for domestic journey in any class and a maximum of Rs 500 per travel for international journey on economy class, Mukherjee said.

Further, domestic air travel to and fro from the North Eastern sector of the country would be exempted even from this tax, the Finance Minister said.