Airlines want fringe tax abolished

In a bid to lower costs, the aviation industry has sought relaxation of fringe benefit tax (FBT) on various free benefits granted by airlines to its employees and passengers. At present, as per the Finance Act, 2005, FBT is levied on free and concession passages given by airline firms to their employees, expenses for crew and hotel accommodation provided to passengers due to delays and cancellations, and expenses on catering and inflight entertainment. The Federation of Indian Airlines (FIA) has written to the finance ministry that the benefits should not attract FBT as these are incurred as part of regular operational requirements. The airline firms have said that all employees of airlines are entitled to free and concessional passages in accordance with International Air Transport Authority (IATA) regulations.

They have argued that airlines do not grant leave travel allowance or concession (LTA or LTC) to the employees. Instead, free or concessional passages are granted that do not involve cash outflow for the airline. “LTA is exempted under the Income-Tax Act and since the passages to employees are in lieu of LTA, the same treatment should be accorded to free and concessional passages as well,” the domestic airline firms have written to the finance ministry. Similarly, for crew expenses as hotel accommodation, they have put forth the view that the expenses cannot be considered as fringe benefit as crew do not gain personal benefit from this. “Due to flight duty time limitations, rest and scheduling requirements, the crew is required to lay over at various stations on the airline’s network.

The expenses incurred for such layovers form a part of the cost of running of the aircraft,” the airlines have said. The industry has advanced a similar logic to seek exemption of FBT on various free facilities provided to air passengers such as free hotel stay during flight delays and cancellations. The carriers have said the provision of such facilities is an operational necessity as passengers are required to be provided accommodation during such events. For expenses on account of catering and inflight entertainment expenses, the industry has argued that such services are provided by carriers as part of amenities to passengers, and are an integral part of the product offering. Further, the services are not provided free since passengers are charged indirectly through the ticket price. The recently-founded aviation industry association FIA plans to lobby with various ministries to ensure a profitable environment for the sector.

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