New Delhi, February 28: : Government on Tuesday decided to include upper class international air travel in the ambit of service tax but exempted aircraft lease rentals from income tax for one year to benefit the large number of airline companies which were in the process acquiring airplanes.
Among the new services which have been included in the service tax net in the 2006-07 budget is international air travel by business or first class. The economy class passengers have been exempted.
The budget proposal also includes travel on cruise ships in the ambit of service tax.
On the exemption proposed to be granted on lease rentals for aircraft and aircraft engines, the budget documents say that the exemption for lease payments would continue with regard to agreements entered into on or before March 31, 2007.
The benefit of exemption from grossing of tax would consequently be available in respect of lease payments made in pursuance of agreements entered into after that date next year when the lease payments become taxable, the documents said.
Keeping in mind the interests of airline companies, especially their crew members, Finance Minister P Chidambaram also reduced fringe benefit tax on 'hospitality' and 'use of hotel boarding and lodging facilities' from 20 per cent to five per cent.
