The Indian aviation sector plays a critical role in transportation, tourism, and trade. Since the implementation of Goods and Services Tax (GST), the sector has undergone major taxation changes affecting air travel, maintenance, leasing, and aircraft operations.
Understanding the GST structure on aviation is essential for businesses, passengers, and industry professionals alike.
The aviation sector falls under both goods (aircraft, spare parts) and services (passenger transport, cargo, maintenance). GST replaced earlier taxes such as service tax, VAT, and excise duty with a unified tax structure.
| Class of Travel | GST Rate |
|---|---|
| Economy Class ✈️ | 5% |
| Business Class 🛋️ | 12% |
| Exempt Flights 🚫 | Helicopter services to specified regions (like North East India) are exempt in certain cases |
Available for business class
Not available for economy class services
Attracts 5% GST under certain conditions when leased from foreign lessors under "finance lease"
18% GST applies in most other general leasing cases
5% GST (with conditions) to promote local MRO industry
ITC available on input goods/services
Generally taxed at 18% GST
Input credit available for registered service providers
| Service Type | GST Rate |
|---|---|
| Domestic air cargo 📦 | 18% |
| International air cargo 🌍 | Exempt (subject to conditions) |
| Courier/Express Services 🚚 | 18% |
✅ Available on business inputs (like fuel, spares, maintenance services)
❌ Not allowed on economy class tickets or personal travel
Critical for airlines and MRO businesses to reduce tax cost
🛢️ ATF (Aviation Turbine Fuel) not under GST yet – still under state VAT
✈️ Complex compliance in cross-border leasing and cargo
📊 Difficulty in availing full ITC for mixed services (passenger + cargo)
The GST regime has streamlined indirect taxation for the aviation industry, but certain gaps remain. While passenger services, leasing, and MRO are clearly defined under GST laws, the exclusion of ATF from GST continues to burden airlines with high operational costs.
For the aviation sector to fly higher, further policy reforms such as bringing ATF under GST, and simplified ITC rules, will be essential.