Centre proposes GST hike on business and premium air travel to 18%: Sources

The Centre is considering a proposal to raise the Goods and Services Tax (GST) on business class and premium air travel from the current 12% with input tax credit (ITC) to 18% with ITC, sources told CNBC-TV18.

Economy-class tickets, whether for domestic or international travel, continue to attract a 5% GST rate. Premium economy, business, and first-class tickets are presently taxed at 12%, applicable uniformly across both domestic and international flights.

GST on air tickets typically falls into the 5% or 12% brackets, with ITC claims allowed only if the travel is directly linked to business activities such as conferences, client meetings, or vendor negotiations.

The proposal comes against the backdrop of a broader GST rate rationalisation exercise. The Group of Ministers (GoM) on GST is expected to recommend eliminating the 12% and 28% slabs, aiming to simplify the structure with item-wise reclassification.

While some rates are likely to be cut, others—including air travel in premium classes—may see increases to balance revenue and growth considerations.

The GST Council will discuss the recommendations at its September 3–4 meeting. Ahead of that, industry and retail bodies have urged the government to implement changes swiftly so the festive season is not disrupted.

Prime Minister Narendra Modi recently described the GST overhaul as a “Diwali bonanza,” with officials indicating that systems are prepared for an immediate rollout once approved.