The Geneva-based International Air Transport Association (IATA) has written to the Finance Minister, Mr Pranab Mukherjee, calling for a relook at the Budget 2010-11 proposal to levy a service tax on domestic and international air transport.

“The recent Union Budget announcement extending service tax to economy class air tickets for both international and domestic flights is absolutely a step in the wrong direction. IATA and its member airlines object in the strongest terms to the extension in the 2010-11 Union Budget of an already unacceptable service tax to economy class tickets,” says the IATA Director General Chief Executive Officer, Mr Giovanni Bisignani.

The communication points out that taxation in any form on the sale and use of air transport is a clear violation of India’s international obligation under the Chicago Convention. “ICAO’s policies were formulated in recognition of the adverse impact that taxation would have on growth and development of the aviation industry,” Mr Bisignani states.

The communication adds that not only does the tax contravene ICAO’s policies, but is also counter-productive.

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