Aviation ministry seeks tax waiver on passenger service fee

NEW DELHI: The civil aviation ministry has asked the finance ministry to waive income tax on the money earned though the passenger services fee (PSF), which is spent on security at all airports.
If implemented, the move will dent the government’s direct tax collection by a tad.

“The income tax department charges tax (in the highest slab) on the fee that was earlier collected by airports. We have made a request to the finance ministry to exempt it from tax, as it is collected by us but managed by a trust,” said an aviation ministry official, refusing to be identified.

The aviation ministry has also requested the finance ministry to bring jet fuel under GST. It is expected to ease the burden on the aviation turbine fuel, which is now taxed up to 36% across states. Jet fuel has up to 50% share in the cost of operations for airlines.

The government has cleared a long-pending issue of increasing the PSF from July 1 to ensure that the collection is enough to meet the cost of securing the airports. PSF has also been linked to inflation, which means it would increase every three years based on the inflation rate. It will take care of any increase in costs.

The PSF fund is now managed by a trust with the Airports Authority of India (AAI) as its main trustee.