The money earned through passenger services fee (PSF) is usually spent on security management at all airports. Keeping this fact in mind, the civil aviation ministry has asked the Finance Ministry to waive off the income tax applicable to the income generated from PSF.
When seen from a different perspective, the request of the civil aviation ministry is going to create a shortfall in the direct tax collection goals.
An official from the civil aviation ministry stated to the Economic Times that the income tax department charges tax as per the highest tax bracket on the fee collected by airports. He revealed that they have made a request to the Finance Ministry to exempt that income from tax as it is collected by the civil aviation ministry but managed by a trust.
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During the meet, the aviation ministry has also requested the Finance Ministry to cover jet fuel under GST. The request pointed at the burden of paying taxes of up to 36% on aviation turbine fuel across the states. Jet fuel takes up to 50% share in the cost of operating an airline firm.
Effective from 1 July 2019, the government raised the PSF to ensure that the collection meets the cost of securing the airports. PSF is connected with inflation of the economy, i.e. PSF will increase once every three years based on the inflation rate. This is how any increase in the cost of securing the airports will be taken care of.
As said by the civil aviation ministry official, income from PSF is managed by a trust along with the Airports Authority of India (AIA) working as the main authority.
For any clarifications/feedback on the topic, please contact the writer at apoorva.n@cleartax.in
